By Craig Burnie

I’ve no idea whether Chancellor Rishi Sunak is a devotee of American self-help author Oliver Napoleon Hill but, as he prepares this week’s Autumn Budget, he might find himself pondering the wisdom of one of Hill’s pithier quotes: “Don’t wait – the time will never be right.”.

Although there may never be a “right” time, does the Chancellor act now or wait for a time that is better?

For the first year of the pandemic, borrowings approached £300 billion, the highest since records began. To address this the consensus is that taxes will need to rise at some point – the question is for whom and when.

Many businesses are only now finding their feet in a more challenging post-lockdown environment and I’m not sure this is the right time to be contemplating increasing their tax burden further, particularly for those who were reliant on the now-closed furlough scheme.

High street retail is struggling and, for most businesses, their biggest gripe is business rates, where a reduction could help bridge the gap with online retailers. The digital sales tax of 2% previously mooted – the so-called Amazon Tax – has been shelved on the back of the OECD’s work on seeking a global agreement for taxing online businesses.

The corporation tax rate increase from 19% to 25% in 2023 has already been set but we are expecting an announcement on the rate of the new Residential Property Developer Tax.

Individuals and businesses need to take into account the forthcoming 1.25% increase in National Insurance contributions which will kick in from April 2022 to fund health and social care costs.

Income tax thresholds have already been frozen – Scottish taxpayers continue to pay income tax at the same rates that apply in the rest of the UK on their savings and dividend income, with dividend tax set to increase 1.25% from next April. That’s particularly pertinent for small business owners who take the majority of their income by dividend.

Any further increase in personal taxes would therefore be a big decision but the Chancellor is coming under a lot of pressure from within his own party to release more cash into the economy.

Changes to Capital Gains Tax have long been rumoured. One of the OTS’s recommendations was to align the rate with income tax rates – that’s unlikely to happen overnight but there might be a benefit to the Treasury of announcing a future increase which would see a flurry of taxpayers crystallising capital gains to benefit from the lower rate of tax.

The OTS has also looked at a simplification of Inheritance Tax and it could be that technical changes to Business Property Relief are something under consideration.

Pension tax relief is one of the biggest costs to the Treasury and another area where rumours of change have persisted but again Mr Sunak will be questioning if this is the right moment.

Another key timing factor is the imminent arrival of COP26. There’s probably never been an occasion when issues around climate change have figured so prominently on a Chancellor’s agenda.

Is there more the Government can do to incentivise businesses to invest in carbon reduction? That could involve further tax reliefs for businesses investing in energy-efficient equipment or tax breaks for individuals investing in energy-efficient businesses. There was a wide-ranging Government consultation this summer on the R&D tax relief system so that may also be an area where we will see some developments.

Fuel duty has not increased for some time and with carbon-reduction targets and COP on the horizon that could easily be a target. Given the recent fuel crisis, however, it’s probably not the best moment to announce an overnight increase.

As our society continues to adjust to the impact of the pandemic, the Chancellor faces a unique set of circumstances, a competing set of demands and strong internal pressures from his own party as he decides when is the optimum time to make the changes which will best aid our economy’s recovery.

Craig Burnie, tax director, Johnston Carmichael