Tax hikes and relief cuts a rising concern for Britain’s higher earners
deVere recently carried out a survey which revealed 60 per cent of higher earners in the UK, or people living abroad with financial links to Britain, are worried about the adverse impact of the November Budget on their wealth.
Indeed, when questioned if they had concerns Chancellor Rishi Sunak would have to increase taxes to help plug the government’s funding gap, 62% said ‘yes’, 17% responded ‘no’ and 21% didn’t know.
A total of 663 deVere clients took part in the survey, earning over £75,000, from the UK, Europe, Asia, Africa, Latin America and Australasia.
The Chancellor has been driving hundreds of billions of pounds into Britain’s economy since March to protect it from the impact of the coronavirus pandemic.
However, now all eyes are on the expanding deficit, which some analysts predict could reach as much as £350 billion this year.
Due to the sheer magnitude of the funding black hole, it is highly likely taxes will rise and reliefs be cut. Possible targets for hikes could include income tax for higher earners, capital gains tax, inheritance tax, and VAT.
In addition, new wealth taxes may be brought in, which was something the Prime Minister was considering before the pandemic hit.
And, it is almost certain that pension tax relief will be targeted.
These are highly atypical times in terms of the economy, and taxes will need to increase in order to plug the gap. And it will be higher earners that can be expected to carry the burden.
As a result, as the survey showed, a large number of these higher earners are worried about how their wealth could be affected, and are therefore now looking into the available international financial planning options to protect it.
Nevertheless, increasing taxes may not be the best way to handle the deficit.
Rather than taxing the country out of this downturn, the Chancellor should strive towards long-term, sustainable economic growth policies.
As global trade becomes evermore competitive, Britain must become more tax competitive. This would drive economic growth far more effectively than a tax hike and relief cuts.
However, of course, it would be safer from a political viewpoint for Sunak to consider tax increases rather than take a bold stance to bolster the country’s growth and competitive edge.
As such, we will likely see more and more higher earners in the UK, or those overseas with financial ties to the country, to look into the international options available to them.