With the next Budget approaching, it may be worth reviewing your finances now. A little forward planning goes a long way.
More than the usual changes to tax rates are expected this time, after various consultations were started in the spring. Draft legislation for the next Finance Bill was published in early July, which means we already know certain things, allowing us to look ahead in our tax planning. For instance, it includes measures to speed up tax payments around buy-to-let transactions.
Several consultations underway could result in some major announcements. For example, the Office of Tax Simplification has been examining options for simplifying the administration of inheritance tax (IHT), with its report due this autumn. IHT is far from perfect in its current form, but simplification can sometimes introduce further complexity – as pension ‘simplification’ demonstrated 12 years ago.
One possibility is that elements of IHT business relief will be ’simplified’ by being abolished. Such a move could restrict, or even end, the growing use of IHT-relieved AIM-based share portfolios in estate planning.
POTENTIAL TAX INCREASES
The government has now committed itself to increasing NHS funding to £20.5 billion a year by 2023. In announcing this pledge, the Prime Minister said it will mean taxpayers will contribute a bit more in a fair and balanced way. According to the Institute for Fiscal Studies, adding one penny to all the main rates of income tax, or 1% to VAT, raises around £6 billion a year, so the ’bit more’ could imply noticeable tax rises.
We will have to wait until the Autumn Budget to see how the Chancellor expects to raise the necessary revenue. In the meantime, in early July it was reported that the Treasury was investigating a 25% flat rate of relief for pension contributions, which could net an extra £4 billion for the Exchequer.
Please get in touch if you would like to discuss how this may affect your financial planning before the announcement.
The Financial Conduct Authority does not regulate tax advice and some types of estate planning.
HM Revenue & Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
For specialist tax advice please refer to an accountant or tax specialist.