Chancellor Rishi Sunak has promised to “balance the books” in a bid to plug a £208 billion hole in the UK’s public finances caused by COVID-19.
In September, Sunak postponed Autumn Budget 2020 and last month the Chancellor suggested tax hikes could be around the corner next spring.
Figures published by the Office for National Statistics in October showed government borrowing soared to £208.5bn between April and September.
At the end of September 2020, the UK was almost £2 trillion in debt, exceeding the size of the economy by approximately 3.5%.
UK debt is expected to grow over the winter to fund the costs of further coronavirus support measures revealed in Sunak’s winter economic plan.
The Chancellor said there are no “easy cost-free answers” and “hard choices everywhere”, but he has a duty to leave public finances strong.
“We have a responsibility to future generations to leave the public finances strong, and through careful management of our economy, we will always balance the books.”
The Office for Tax Simplification is expected to publish a report imminently, outlining recommendations to revamp the capital gains tax system.
Ideas currently on the table include equalising capital gains tax rates with income tax which would raise much-needed revenue from 2021/22.
Another option that could prove popular with the public and help simplify the tax system would be to merge capital gains tax with inheritance tax.
The Treasury might also press ahead with a plan to bring self-employed National Insurance contributions in line with the rates paid by employees.
Sunak previously hinted it was becoming increasingly difficult to justify the inconsistent contributions of those who work for themselves compared with employees.
However, reforming the £38bn pension tax relief is not believed to be on the cards, following several consultations on the topic in recent years.
Get in touch for tax-planning advice.