The Autumn Statement – reflections and the tax angles, part two
In part one I suggested we need to think selfishly in context of the challenging economic conditions we are all having to face.
The details of the forecasts, budgets etc. provided by the Autumn Statement are of limited relevance to us as individuals.
What the Chancellor effectively did last Thursday was tell us what we already knew. He is going to have to spend less, and tax us more. We already knew that, his statement was not news.
He did announce a raise of more money from enhancing the Windfall Tax on energy companies, but within hours (minutes?) of his announcement, some of his less-than-fans were calling him out on this. How much money has come from the Windfall Tax so far? Apparently £0. That’s because of “loopholes”. So, what’s going on? The point is we shouldn’t care too much, because ultimately we cannot impact this (except maybe at a general election, but even then do we really know what to do?) – so we can take part in debate and chatter, but none of this helps us with our own affairs.
The most relevant aspect for each of us was the extension of frozen allowances, and the reduction in some other allowance levels. Again, the detail is secondary, we should hone in on the basics. Taxes are going up.
For very rich people by quite a lot as it happens, but the reality is that most rich people – to a large extent – can decide to pay whatever level of tax they want. That’s why people often say that cleaners pay higher tax rates than the bankers or hedge fund managers in the offices, the cleaners clean.
So, again what do we make of it? How does all this swirl around to create something of meaning to us?
I wouldn’t say it is every man and woman for themselves, but on the other hand it is a bit like that!
It doesn’t matter what your circumstances are, you will be in a position to make a difference to your tax rate and your tax payable. Whether you are very rich, a little bit rich or not that rich-at-all, you can make a difference to your tax position.
Just how much you can effect this will be dependent on your situation, but you will have flex.
Most of the time the level of tax we are asked to pay is not sufficiently taxing to warrant too much effort to work out whether this can be changed (i.e. reduced), through legal means.
Most of the time we work on simple tax-saving measures, such as utilising Pensions and ISAs, paying Capital Gain Tax instead of Income Tax (where possible) and so on.
When overall taxation is rising and the goalposts are being moved, both of which are true at the current time, then at our individual level we might start to act differently, and organise ourselves to make sure we can cope and we don’t pay anything we don’t need to and address the new tax regime accordingly and work harder on our own tax planning.
And this is where we are today, and all the Autumn Statement has really done, is to cement this position.
The great thing is there was nothing in the way of a bombshell and much of the changing position is about what is coming,- not what has arrived.
This means it makes perfect sense to get tax planning now, ahead of the curve.
In part three I will outline some ideas of what this might look like for different people, in different situations.