In recent years, Budgets have been a largely boring affair. However, I suspect the recently announced Autumn Budget on Tuesday 30 October, will be anything but.
Predicting what politicians will do is impossible, as their decisions often seem to show a distinct lack of common sense.
Having penned themselves in by clearly stating which taxes they won’t increase, I think Rachel Reeves will attack the wealthy wherever and however she can.
I fear that with a large majority and the ability to blame the Conservatives, combined with the age-old strategy of getting all the bad news out early, this could lead to some interesting and challenging tax rises.
Whilst we have zero idea about what the government will do, we can consider what they might do and what actions we could take in advance as a result.
So, in no particular order…
1 – Capital Gains Tax (CGT)
Increasing CGT to align with income tax is a distinct possibility. It’s also possible they could remove the exemption on death.
Action
Crystallising any gains before the Budget – paying 10-20% (more for property) could be a sensible move. Let’s face it, the rates are unlikely to be lower in the future.
2 -Pensions
The maximum tax-free lump sum could be reduced, contribution levels could be restricted, or the rate of tax relief could be reduced.
Action
If you are thinking about taking a tax-free lump sum or making a pension contribution, doing so before the budget is a sensible strategy.
Pensions could also be brought into the inheritance tax (IHT) regime, perhaps by introducing a new tax-free band at, say, £500k per person. There is no advanced planning required, although it’s worth considering IHT as per below.
3 -IHT
A number of options are open to the government. They could, for example, tax gifts during lifetime, remove the gifts out of income exemption, or tax all gifts into discretionary trusts.
Another tightening of the IHT net could be the extension of the seven-year gifting rule, which has remained unchanged since the introduction of the Inheritance Tax Act in 1984 despite life expectancy increasing dramatically. A move to, say, 15 years would largely go unnoticed by voters.
Action
If you are considering gifts of any nature, making these before the Budget could prove to be a very wise move.
4 – Business Property Relief
They could also look at removing business relief exemptions, although that seems unlikely as they’re trying to encourage investment in the UK.
Could there be any good news?
I doubt it. The removal of winter fuel payments seemed to be a very clear “shot across the bows” and an indicator of more radical decisions to come.
We currently have just under two months until the Budget, and some changes may not come in immediately, so hopefully we have time to take the necessary action.
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