Pre Autumn Budget Action

by | Sep 24, 2024 | Budget, Business exit planning, Business Property Relief, Capital Gains Tax, Economy, Government Announcements, Inheritance Tax, Owner Managed Businesses (OMBs), Pension & Investment Planning, Selling your business, Tax, Tax advice, Tax Planning, Taxation

pre Budget Actions

Craig Simpson, Tax Partner at Bates Weston considers the Chancellor’s likely plans at the Budget and what pre Autumn Budget action taxpayers may be able to take.

Speculation is rife as to what tax increases are on the way in the Budget on 30 October 2024. The press seemed to have worked through most taxes and speculated over increases. Of course no one really knows. However there will have to be a squeeze on middle England earners, those that earn more than £50,000 per annum, in full-time employment under PAYE as they have very little opportunity to plan. Here are a few thoughts on what might happen.

What might the Budget bring?

  1. Rachel Reeves could do absolutely nothing and keep the tax thresholds static. Known as fiscal drag huge amounts of tax are raised by people moving into high rates of taxation as their income grows.
  2. By far the biggest revenue raise could come from limiting higher rate income tax relief on personal pension contributions. At the moment a higher rate taxpayer can get 40% relief from making personal pension contributions, this could be limited to 20% or a flat rate
  3. Limiting the level of tax free cash from pensions. Could the level of tax free cash be limited to say £200,000? Quite a move but anything is possible.
  4. Increase Capital Gains Tax – this is expected. Although the treasury’s own prediction is that increasing the rate will result in a reduction of tax revenues. My expectation is a main rate of CGT of 30%. The mere threat of an increase is making people accelerate disposals to before the Budget.
  5. Increase the rates of dividend taxation. Closing the gap completely between dividends and earned income.
  6. Limit or remove Inheritance Tax reliefs such as Business Property Relief – I actually feel this is unlikely due to the knock on effect on employment. There is no point in bankrupting a private limited company for 40% Inheritance Tax.

What action could be taken before the Budget?

  1. Make personal or corporate pension contributions.
  2. If you are taking tax free cash from your pension in the near future, take advice on accelerating it.
  3. Accelerate business disposals.
  4. Accelerate sale of other assets.
  5. Transfer assets qualifying for Inheritance Tax Business Property Relief to the next generation or into trust.

The key here is not to create transactions but to accelerate transactions that are expected to happen in the near future.

As always, you are reminded that this article is generic in nature and you should take no action based upon it without consulting your professional advisor.

Related Blogs:

Autumn Budget: Pension Tax Relief