Autumn Statement Predictions?

Pat38493

But increasing VAT is subject to the same moral argument as IHT - VAT is a tax that you pay on money that you were already previously taxed on (and so is most other taxes).  This is why I don't quite get the argument that IHT is not right because you were already taxed on that money - that's true of almost every other tax as well.

MattMattMattUK

Pat38493 said:

But increasing VAT is subject to the same moral argument as IHT - VAT is a tax that you pay on money that you were already previously taxed on (and so is most other taxes).  This is why I don't quite get the argument that IHT is not right because you were already taxed on that money - that's true of almost every other tax as well.

Not quite, we have always had both direct and indirect taxes, an economy needs a mix of both, both for economic and societal reasons. The argument against IHT is that it is being taxed just because someone has died. It was taxed at point of earning, it will be taxed again when it is spend, there is very little moral justification to add in the intermediate stage of a death tax just because someone died in the middle. The inherited money will then be spent, which if it is on taxable goods will then pay money to the exchequer and if not in taxable goods those are goods which the country has deemed should not be taxed. 

MK62

MattMattMattUK said:

MK62 said:

MattMattMattUK said:

Grumpy_chap said:

GrubbyGirl_2 said:

I think they will increase the IHT threshold to £1m 

That might grab headlines as a simplification but, for many people (couples) the IHT threshold is effectively £1m now in any case.
£325k each = £650k couple standard IHT threshold
£500k each = £1m couple IHT threshold if passing on the family home to children

Unless the comment was meant to be read as a threshold £1m each, regardless of whether that includes property and regardless of whether the beneficiaries are children of the deceased. 
That would be a big change the in the threshold.  I suspect it would have a small impact on the total tax raised.

I strongly suspect it will not be a change in the threshold. Any change in IHT will be designed to help high net worth Conservative supporters and voters, raising the IHT threshold makes little difference when one is worth £10million or more, however lowering the IHT rate from 40% to 20%, 10% or abolishing it entirely would be the way to go if the aim were to sure up that component of their vote. 

IHT is consistently voted the most hated/least liked tax in the UK, 70-85% of people think it should be abolished entirely depending on when asked and around 90% think that the 40% rate is too high. It becomes more acceptable if the rate is around 10%, but even then more than two thirds of people think it should be abolished as they regard it as immoral that money which has already been taxed, or from assets which were paid for from taxed income should then be taxed again just because someone died. Personally I agree that IHT should be abolished in it's entirety, as should stamp duty, both are economically poor taxes. I would also reform council tax, a flat rate per dwelling and a per occupant charge, I would also raise VAT to 25%, as it only applies to non-essentials it largely falls on higher earners and it would help nicely with bringing the deficit down, as well as having an inflation dampening effect. 

I suspect if you asked the general public if they'd rather see IHT abolished, or a rise in their currently frozen Personal Allowance, the majority would choose the latter, even if they don't particularly like IHT in principle.

They probably would, because the electorate love a bribe.

MK62 said:

As for reforming council tax, they already tried to base it on a per occupant basis.......the poll tax.... it wasn't particularly popular to say the least,

They did yes, the Community Charge (Poll Tax) was a far more sensible scheme than either the old rates system or the current Council Tax system, but people do not like sensible.

MK62 said:
and raising VAT to 25% at this time would decimate the retail and hospitality industries at a time when they're already struggling.......

It likely would not, it would be a relatively small rise and most retail is already dying anyway and will die regardless of what happens to VAT. With regard to hospitality a 5% rise might be a bigger impact on them, however I also think business rates need reform and a huge reduction and that would be more beneficial, that or I would potentially suggest a reduced rate of VAT for hospitality. 

MK62 said:

If the chancellor has any wiggle room, raising the Personal Allowance should be the first priority, followed by shifting the 40% tax threshold upwards........fiddling with IHT should wait until we are no longer in the middle of a cost of living crisis.......it will do nothing at all to help people struggling at the moment. 

Raising the personal allowance is unlikely to be his priority, they know the next election is lost, so better to feather their own nest, hence changing IHT. Additionally he has said that he will not make any inflationary tax changes and raising the personal allowance would be inflationary, so a very bad change to make at the moment. 

.......and do you think raising VAT to 25% would not be inflationary?

MattMattMattUK

MK62 said:

MattMattMattUK said:

MK62 said:

MattMattMattUK said:

Grumpy_chap said:

GrubbyGirl_2 said:

I think they will increase the IHT threshold to £1m 

That might grab headlines as a simplification but, for many people (couples) the IHT threshold is effectively £1m now in any case.
£325k each = £650k couple standard IHT threshold
£500k each = £1m couple IHT threshold if passing on the family home to children

Unless the comment was meant to be read as a threshold £1m each, regardless of whether that includes property and regardless of whether the beneficiaries are children of the deceased. 
That would be a big change the in the threshold.  I suspect it would have a small impact on the total tax raised.

I strongly suspect it will not be a change in the threshold. Any change in IHT will be designed to help high net worth Conservative supporters and voters, raising the IHT threshold makes little difference when one is worth £10million or more, however lowering the IHT rate from 40% to 20%, 10% or abolishing it entirely would be the way to go if the aim were to sure up that component of their vote. 

IHT is consistently voted the most hated/least liked tax in the UK, 70-85% of people think it should be abolished entirely depending on when asked and around 90% think that the 40% rate is too high. It becomes more acceptable if the rate is around 10%, but even then more than two thirds of people think it should be abolished as they regard it as immoral that money which has already been taxed, or from assets which were paid for from taxed income should then be taxed again just because someone died. Personally I agree that IHT should be abolished in it's entirety, as should stamp duty, both are economically poor taxes. I would also reform council tax, a flat rate per dwelling and a per occupant charge, I would also raise VAT to 25%, as it only applies to non-essentials it largely falls on higher earners and it would help nicely with bringing the deficit down, as well as having an inflation dampening effect. 

I suspect if you asked the general public if they'd rather see IHT abolished, or a rise in their currently frozen Personal Allowance, the majority would choose the latter, even if they don't particularly like IHT in principle.

They probably would, because the electorate love a bribe.

MK62 said:

As for reforming council tax, they already tried to base it on a per occupant basis.......the poll tax.... it wasn't particularly popular to say the least,

They did yes, the Community Charge (Poll Tax) was a far more sensible scheme than either the old rates system or the current Council Tax system, but people do not like sensible.

MK62 said:
and raising VAT to 25% at this time would decimate the retail and hospitality industries at a time when they're already struggling.......

It likely would not, it would be a relatively small rise and most retail is already dying anyway and will die regardless of what happens to VAT. With regard to hospitality a 5% rise might be a bigger impact on them, however I also think business rates need reform and a huge reduction and that would be more beneficial, that or I would potentially suggest a reduced rate of VAT for hospitality. 

MK62 said:

If the chancellor has any wiggle room, raising the Personal Allowance should be the first priority, followed by shifting the 40% tax threshold upwards........fiddling with IHT should wait until we are no longer in the middle of a cost of living crisis.......it will do nothing at all to help people struggling at the moment. 

Raising the personal allowance is unlikely to be his priority, they know the next election is lost, so better to feather their own nest, hence changing IHT. Additionally he has said that he will not make any inflationary tax changes and raising the personal allowance would be inflationary, so a very bad change to make at the moment. 

.......and do you think raising VAT to 25% would not be inflationary?

Raising taxes is counter inflationary.

MK62

Raising direct taxes might be, but raising VAT from 20% to 25% would certainly be inflationary, as it would inevitably mean higher prices on goods and services.
It'd also be something of a regressive move, as the bottom income quintile currently pay over twice as much VAT as a percentage proportion of their total income, compared with the top quartile.......raising the level of VAT would further widen this gap.

MarkCarnage

The tables on comparative tax between countries above also appear to leave out National Insurance, which is effectively a tax, and will increase the effective rate of tax quite significantly for those in the £12k -£50k bracket. 
The whole UK tax system is a mess caused by generations of politicians and needs complete reform...it is regressive in the wrong places, has marginal rate 'cliff edges' and undertaxes property at the expense of income at personal tax level. It also favours debt over equity at a corporate level. 
I am of course not holding my breath about any attempt to deal with this, and indeed this time round expect to see:
1) Even more distortions to bribe whatever small segment is deemed essential to be bribed to get the desired result under our FPTP voting system
2) Much trumpeting of very minor changes to exploit the complete numerical ignorance of most. 

All encouraged by the Mail/Express/Telegraph, whose owners will continue to benefit. 

michaels

I suspect the politics are key, increasing the personal allowance might be fair and sensible but I suspect no one will thank the Tories for dong so nor think abut voting Labour for that reason if they don't - whereas inheritance tax may just be an issue that makes a waiverer vote Tory rather than Labour or not at all.  It is also an issue where they can have a different policy to Labour.

One problem we have now is that 'mass affluence' is resulting in higher earners trading income for time (ie working shorter hours/retiring earlier) and these are precisely the higher marginal rate / net tax payers the country needs to balance the books.  This would suggest that taxes be shifted from income to consumption to discourage this 'selfish' behaviour, but as noted above VAT tends to be regressive despite the food/kids clothes exemption due to people's spending choices.

bonnyrigger

Taxable income	Band	Tax rate
Over £12,571 to £14,732	Starter rate	19%
Over £14,733 to £25,688	Scottish basic rate	20%
Over £25,689 to £43,662	Intermediate rate	21%
Over £43,663 to £125,140	Higher rate	42%
Above £125,140	Top rate	47%

Just correcting a previous post on Scottish tax rates, the actual point you pay more tax in Scotland than England us 27850. Guessing average pensioners pull in less than that.

MattMattMattUK

MarkCarnage said:

The tables on comparative tax between countries above also appear to leave out National Insurance, which is effectively a tax, and will increase the effective rate of tax quite significantly for those in the £12k -£50k bracket. 

They include NI, I am unsure why you think they omit NI. I grouped everything under "income taxation" not "income tax" for the reason that in the UK we have Income Tax and National Insurance, other countries have national and regional income taxes etc. 
Take £25k for example, the £3,978 figure is made up of £1,492 NI and £2,486 Income tax. 

MarkCarnage said:

The whole UK tax system is a mess caused by generations of politicians and needs complete reform...it is regressive in the wrong places, has marginal rate 'cliff edges' and undertaxes property at the expense of income at personal tax level. 

Property taxes are bad taxes economically, they are generally taxes that should not exist. A services tax which is what Council Tax should be, is reasonable, as is a tax based on occupation and so theoretical impact on local services. Taxes based on the value of property are not sensible or rational.

MarkCarnage said:

It also favours debt over equity at a corporate level. 

There are a lot of issues with our Corporation Tax, it does not favour investment either, especially when compared to other nations who successfully built business taxes which encourage investment and encourage reinvestment of profit back into the business. Corporation tax needs wholesale reform, but I am not sure that is going to come from an autumn statement. 

MarkCarnage said:

I am of course not holding my breath about any attempt to deal with this, and indeed this time round expect to see:
1) Even more distortions to bribe whatever small segment is deemed essential to be bribed to get the desired result under our FPTP voting system
2) Much trumpeting of very minor changes to exploit the complete numerical ignorance of most. 

This is a pre-election period, the Conservatives know that they are going to lose the election next year, the only question is how many previously safe seats they can hang onto, and how many policies they can push through now that offer their voters long term benefit, whilst at least staying vaguely close to their fiscal rules. Hence the IHT changes. 

MarkCarnage said:

All encouraged by the Mail/Express/Telegraph, whose owners will continue to benefit. 

Look at their markets, people over 70 and high net worth households, they will give those people what benefits they can ahead of the election, although largely targeted at the latter group and they will do what they can to secure a job in the private sector when they lose their seat at the next election.

hugheskevi

MarkCarnage said:

The whole UK tax system is a mess caused by generations of politicians and needs complete reform...it is regressive in the wrong places, has marginal rate 'cliff edges'...

This article is very interesting to show what has been done with all the various little bolt-ons to the income-tax system - it is easy to forget things which may not affect us personally, but all the changes around student loans, childcare, Child Benefit, Marriage Allowance, Personal Allowance withdrawal and so have created a very bizarre set of work incentives.