However, Butcher argued otherwise.
He said: “This is a deceptively large tax rise which will disproportionately impact lower earners, equating to a hike of more than 10 per cent in real terms, not the 1.25 per cent advertised.
“Rumour has it Sunak is looking to soften the blow by increasing tax bands to remove an estimated 150,000 people from income tax altogether. This attempt to ease the burden of the cost of living crisis for the most financially vulnerable will likely be supplemented by other alleviating measures expected to be unveiled on Wednesday, such as energy bill rebates and fuel duty cuts.”
Dividend allowance
New changes to dividend taxation are already due to come into effect from April 6 2022, including a higher rate of taxation and a higher dividend trust rate.
However Suter said it doesn’t mean further tweaks are off the table.
“In a further squeeze on investors and some self-employed, the government could cut the current £2,000 dividend tax-free allowance and drag more people into the new tax rates.
“At the current allowance the government says 60 per cent of people with dividend income outside an ISA or pension are within the current tax-free limit, which has to look like a fairly juicy percentage to reduce. The government has form on this, having already cut the rate from £5,000 to £2,000 in 2019, so a cut to £1,000 or even £500 wouldn’t be impossible.”
Annual or lifetime allowance cut
The freezing of the pensions lifetime allowance at £1,073,100 until 2025/26 was one of a range of stealth taxes announced in the 2021 Spring Budget.
Cameron said: “By not increasing this in line with inflation, it is reducing the amount people can save in pensions in ‘real’ terms without facing an additional tax charge.
“The lifetime allowance was designed to limit the amount of pensions tax relief for the wealthy, but now it increasingly impacts many not so wealthy people, particularly those with valuable defined benefit pensions.”
Cameron argued that any more individuals could face an unexpected tax penalty as a result.
“We’d welcome Rishi revisiting this decision in light of current rocketing inflation, ideally by unfreezing the limit earlier than planned and returning to inflation-based increases.”
Meanwhile, Suter added that if the Treasury is looking to save money on pension tax relief, the annual allowance is the simplest lever to pull.
“The annual allowance is currently set at £40,000, while savers can also ‘carry forward’ up to three years of unused allowances. Lowering this to £30,000 or even £20,000 - in line with the ISA allowance – would raise revenue for the Exchequer while only affecting those who make very large pension contributions.
