Submitted by Catherine Dhanjal
| on Mon, 08/24/2020 - 15:49 | In Economy
The last few months have been challenging for everyone and we have all been affected in some way, whether on a financial or more personal level. With rising unemployment figures, the pressure on an already weakened economy will continue to grow.
The government has attempted to ameliorate the devastating financial impact Covid-19 has had on workers and businesses, including the introduction of:
- The furlough scheme
- Short-term VAT cuts for hospitality and tourism
- Discount schemes for consumers eating out during August
- A temporary cut in stamp duty (with the threshold increasing to £500,00) in England and Northern Ireland.
However, it has been estimated that over the next couple of the years the UK government will be left with a debt in the region of £298bn upwards. This figure stands in stark contrast to the £55bn the government expected to borrow pre Covid-19.
Faced with a growing deficit, it is perhaps inevitable that the government is going to have to raise taxes or cut spending and there has been a lot of speculation as to how this might be done, with tax increases being the most likely outcome. This puts the government in a difficult position as they will need to be seen to be fair and put the burden on those most able to carry it but we probably won’t know exactly what this entails until the autumn.
But the money will have to be found somewhere.
How will we pay for all of this?
The Bank of England’s low interest rates in lending to the government have proved crucial and could help in the long term as inflation is likely to reduce the cost of that debt in the future.
Another suggested proposal has been for a tax on excess profits made by firms that have done well during the pandemic.
Another likely outcome would be a £40bn tax rise which would result in an increase of 7p on the basic rate of income tax or an increase of 6% on VAT. There may also be tax increases on capital gains tax and pension savings tax relief.
The government will also hope to recoup taxes by pursuing tax evaders. The number of task forces within HMRC has increased over the past ten years and whilst they suspended activities during the coronavirus crisis, its enforcement teams will no doubt be targeting specific sectors where there is a high risk of tax evasion. There is also likely to be further investment in technology to target those abusing the system.
There’s currently a great deal of speculation and many questions won’t be answered until the Chancellor’s Autumn Statement.
How we can help
If you’re struggling with your tax affairs or other financial issues during this time, why not talk to us. Here at Sestini & Co we dedicate considerable time and expertise to keeping up with changing case law and ensuring we know the tax rules.
If you need help with any tax-related issues and would like to speak to us, give us a call on 01761 241 861 or email us today.
We will be pleased to discuss by phone or to invite you to an online consultation.