Chancellor eyes-up tax hikes for capital gains, dividends, non-doms…

This comes following briefing of journalists that Monday’s meeting between Chancellor Jeremy Hunt and Prime Minister Rishi Sunak had resulted in agreement it was “inevitable that everybody would need to contribute more in tax in the years ahead” thanks to the “eyewatering size of the fiscal black hole.”

The Resolution Foundation think-tank warned earlier this week that without spending cuts or tax rises, the Government’s deficit could soar to £89bn by 2026-27.

This week’s speculation

According to today’s Daily Telegraph the Chancellor is set to launch a ‘capital gains tax raid’. The paper says the Chancellor is considering an increase to the headline rate of CGT but that reductions in CGT reliefs and allowances are more likely. It notes that, as Chancellor, Rishi Sunak previously considered increasing CGT to bring it in line with income taxes.

The Telegraph, FT and Guardian all report that the Chancellor is considering an increase in the dividend tax rate and a cut to the £2,000 tax-free dividend allowance. Halving the latter would save £455 million in the next tax year, the FT reports. Kwasi Kwarteng had of course planned to cut dividend tax rates by 1.25 per cent from their current level but Jeremy Hunt has already cancelled that plan.

The Telegraph further reports that it has been told there will be no extension of the SDLT cut adopted by Liz Truss, meaning no extra intervention targeted at propping up property prices. Treasury officials are not planning any extra help at all for homeowners, says the paper.

Today’s Guardian, meanwhile, says that Treasury officials are examining whether the Autumn Statement could include changes to non-dom status. No final decisions have been taken but Whitehall sources told the paper options being examined by the Treasury’s high net worth individuals policy team include reducing the time period over which UK residents can avoid tax on their worldwide income. Experts suggest that cutting the duration from 15 to five years could raise an additional £1.6 billion a year.

It has been widely reported (including by The Times) that the Chancellor is planning to extend windfall taxes on oil and gas companies. All three of the options being looked at – increasing the rate from 25% to 30%, extending the levy until 2028 and expanding it to cover electricity generators – are thought likely to be adopted. Oil giant BP this week announced global profits of £7.1 billion between July and September.

The Times has also been told that Sunak and Hunt have discussed allowing local authorities to raise significantly more by removing the requirement for them to hold a referendum if they want to increase council tax by more than 2.99 per cent.

Additionally it has been widely reported that the PM and Chancellor have agreed that tax thresholds will be frozen until 2028, two years longer than previously announced. Analysis by the Centre for Economics and Business Research suggests extending the freeze will drag an additional three million workers into higher income tax bands.

According to the Sunday Telegraph, the Chancellor is thinking about introducing road tax for electric car and van owners in less than three years. Currently, zero vehicle excise duty is paid on electric vehicles, with the Government previously guaranteeing the exemption until at least 2025 - the point at which the Treasury is now considering levying the tax on zero-emission cars and vans.

Meanwhile the Sun on Sunday reports that “a new tax could be slapped on foreign millionaires who own posh homes in the UK while living overseas”.

However, the Sunday Times reports that government sources have played down suggestions that the PM and Chancellor are considering a windfall tax on banks. Sunak and Hunt are said to be looking at the eight per cent surcharge that banks pay on top of corporation tax though. The sources expect this to be cut to three per cent, as planned when the corporation tax increase to 25 per cent was first proposed.

Beyond tax, there is speculation the Chancellor will announce:

• benefits will rise in line with wages not inflation next year
• a delay to the introduction of a cap on social care costs
• public sector pay rises will be limited to two per cent across the board in 2023-24
• the scaling back of Norther Powerhouse Rail