Spring Statement review - serious concerns over inflation and the rise in the cost of living
With the combination of steep rises is energy costs, National Insurance bills rising from April and motor fuel costs rising, the spiralling cost of living in the UK will continue pushing the headline monthly inflation figures well above the Bank of England's (BoE) target and see pressures for wage increases in many sectors, We will be looking for the updated pedications on key features likely to appear in the Chancellor's Statement will come from the usual sources like firms like BDO. BDO predications

Fuel duty
Amid warnings that fuel prices could stay near record levels and quite likely rise further, the Chancellor is being urged to take action to help motorists and businesses across the country. There will be strong pressure for not only continuing the fuel duty freeze (it has been frozen for 11 years) but also with petrol and diesel prices soraing there is already strong pressure for cutting the rate of fuel duty and associated taxes and VAT thereon.

It's worth noting that without any reference to an extension from the Chancellor the fuel duty freeze will automatically end. That's because existing legislation around fuel duty stipulates how much it goes up by each year. Fuel duty is 57.95p per litre of petrol or diesel in the UK and the rate has been frozen for 11 years by successive Conservative chancellors.

UK public warms to road pricing - reform of motor taxes
With an increasing rate of take-up of electric cars and the retirement of petrol and diesel cars - so measures for replacing fuel duty are likely to appear in the Autumn Budget 2022. The Government's ban on the sale of new petrol and diesel vehicles from 2030 has made reform of motor taxes an urgent question for the Treasury because the switch to electric cars means almost £30bn in fuel duty raised annually for the Treasury will need to be replaced. But politicians have shied away from introducing road pricing as an alternative, however polling for the Social Market Foundation suggests that the conventional political wisdom that voters are opposed to road pricing no longer holds true. Its research found that 38% back road pricing to replace fuel duty and other taxes, with just over a quarter opposed (26%). The rest were open to persuasion, the SMF said, and shared a strong public perception that fuel duty was a heavier burden than other taxes.

The sales trend for electric vehicles (EVs) is significant - last month sales of battery electric cars reached a record 33,000, about 15% of all new vehicles sold in the UK in September, including almost 7,000 Tesla Model 3s. But EVs remain a small fraction of all cars on UK roads, currently between 1% and 2% of all cars on UK roads.

VED exemption for classic cars
The rolling 40 year exemption will hopefully not be removed but it's unlikely efforts to get it extended to a rolling 30 year concession will be considered at this time by the Chancellor. More

Capital Gains Tax changes
Unlike other types of investment assets, the profit you make upon the disposal of a classic car does not generally attract Capital Gain Tax (CGT). This is because cars are generally classed as a ‘wasting asset’ that is estimated to have less than 50 years’ worth of use remaining. Even if the vehicle remains in existence for a period in excess of those 50 years, the same exemption applies. The tax is paid when people sell assets such as shares or a second home. There are rumours that the current CGT rates may be tinkered with and it's been suggested that CGT rates could be aligned more closely with income tax rates, which could mean scrapping the current CGT rates of 10% and 20% (or 18% and 28% for property) and instead making everyone pay income tax rates on their gains. A report by the Office of Tax Simplification, published in November 2020, recommended that CGT rates should be increased to bring them into line with income tax. But it would be unlikely to raise significant extra amounts of tax, as it is typically paid by only about 275,000 taxpayers and raises less than £10bn a year.

Wealth Tax
There has been much political discussion about a one-off wealth tax to help pay for the huge debt built up by the UK Government providing various levels of COVID support measures. Some would prefer to see a more permanent wealth tax and others firmly against it but there are very few examples of wealth taxes that work well and over the last few decades many have been abandoned. The UK already has two ways in which to tax assets; capital gains tax and inheritance tax. Both of these regimes are far from perfect, but it arguably makes more sense to deal with some of the flaws in those two regimes rather than introduce a third asset tax. The UK Government has already discounted a one-off wealth tax so, although the conversations may well continue, but KPMG say they "would not expect the introduction of a wealth tax during this Government. But never say never!".