a close up of the words tax invoice
Historically the biggest contributors to the Government’s income have been the taxes on tobacco and alcohol, but all that is about to change. The Treasury estimates that by the end of 2016 the tax collected from homeowners and savers will exceed those collected from ‘booze and cigs’!
The end of the 2015/16 financial year will see inheritance tax (IHT), stamp duty land tax (SDLT) and stamp duty on shares generating around £21.9 billion in revenue; compared with £21 billion from alcohol and tobacco. This is according to a recent report in the Daily Telegraph.
As a result the Government (and the Chancellor in particular) is under increasing pressure from MP's on both sides of the house to reform the tax system. There are growing calls to offer more help for those who save and own their own homes by, for example, raising the IHT threshold from £325,000 to £1 million. In fact, that measure was a Conservative pledge from the last election but has been opposed by the Liberal Democrats.
The other key area identified by MP's is a possible reform to the current stamp duty system which is seeing more and more homes moving into the over £125,000 threshold due to a rising UK housing market. Under the current system, home buyers pay 1% stamp duty for properties valued between £125,001 and £250,000; homes priced between £250,001 and £500,000 are taxed at 3% of the total value and above £500,001 the tax rises to 4% of the total value.
There are calls for this to be changed to a progressive tax, where the increased tax is only applied to the value between two price bands. So 1% tax paid on the element between £125,001 and £250,000; 3% on the element between £250,001 and £500,000, etc.
Watch this space……