The Autumn Budget due to be announced on 30 October is on virtually all our users’ lips currently, with the need for urgent asset sales, the potential for IHT exemptions being withdrawn and decisions around pension top-ups all hot on the agenda.
Could flat rate pension relief be rescinded?
We already know that the current pension regime has already been highlighted for change, so it is reasonable to expect that the tax advantages currently on offer could be significantly trimmed.
Two good things are that the Labour government has committed to not reinstating the pension lifetime allowance, which would be of particular concern for those with savings over or approaching £1,073,100; and that the ability to withdraw 25% of your pension as a tax-free lump sum is to remain. However, rumours are swirling that the flat rate of pension tax relief could be rescinded. Currently, higher rate taxpayers can claim an additional 20% tax relief on top of the 20% which is paid into their pension scheme, and additional rate taxpayers can claim an additional 25%.
Pensions and retirement investment strategy are always big features of those who make enquiries to our service, but this has hugely ramped up as the Autumn Statement approaches
Pensions and retirement investment strategy are always big features of those who make enquiries to our service, but this has hugely ramped up as the Autumn Statement approaches. In particular, many people have been asking for advice about boosting their contributions for this tax year and carrying forward unused allowances from previous years (this could be £60,000 in the current tax year and for the past three also potentially).
These are, undoubtedly, big choices, but the savings long term could be just as large. Pensions are one area where proper advice is essential, however, so we would advocate getting professional wealth management advice as a matter of urgency if you are unsure of how your strategy should change.
Last-minute asset sales are being set in motion
The fact that tax on capital gains is currently levied at a significantly lower rate than income tax (20% versus 10% respectively for basic rate taxpayers) has led to suggestions that the Labour government will see equalisation as an ‘easy win’ with perhaps better optics than further hammering workers on earned income.
As a result, we’ve been hearing from a significant number of users who are contemplating bringing forward asset sales as a matter of urgency. Even if CGT isn’t raised to the same level as income tax, it is difficult to see the conditions for sale getting better and – depending on the type of asset in question – there may still be enough time to make a sale and lock in the lower CGT rate currently available.
Even if CGT isn’t raised to the same level as income tax, it is difficult to see the conditions for sale getting better and – depending on the type of asset in question – there may still be enough time to make a sale and lock in the lower CGT rate currently available
There are other options to explore, however. Couples might consider interspousal transfer in order to leverage the lower earner’s marginal tax rate or making arrangements so that both partners’ capital gains tax allowance can be used.
Remember, though, that CGT should only be one element of your strategy and there may be other good reasons not to make such changes (or to implement other ones instead). You should always consult a tax adviser along with an investment adviser before making any major changes to your wealth management plans.
Top Tip
Lee Goggin
Co-Founder
Landowners fear IHT will end their estates
Although the allowances on Inheritance Tax have been frozen for some years now, bringing many more families into the IHT net, it is thought that still only about a fifth of estates are made to pay. There has therefore been a lot of media speculation about the Chancellor looking at exemptions, in particular those for land, in order to further increase the revenue from death duties.
Although relatively few people are significant landowners, we have certainly had enquiries from those who – for instance – own small working farms are who are scared that the abolition of the IHT exemption would effectively mean the end of their estate: when huge IHT bills are due, many families would simply have to sell up.
It may not be particularly pleasant to contemplate such things, but you should always have an IHT mitigation plan in place – and regularly update it – so that you can keep as much of your wealth as possible in the family
This is also often the case where high-value family homes are concerned, so you will often see families taking out loans in order to be able to retain the property. There are other solutions, though, such as taking out a life assurance policy which will cover any IHT exposure; the proceeds of these technically never enter your estate and are therefore exempt from death duties (the funds are also available quickly).
It may not be particularly pleasant to contemplate such things, but you should always have an IHT mitigation plan in place – and regularly update it – so that you can keep as much of your wealth as possible in the family.
Don’t delay, take positive action today
Although the country is looking forward with trepidation to the Autumn Budget, we would say that those who are concerned should stop reading all the speculation in the press and get positioned to take action instead.
By consulting with a wealth management adviser and getting them familiar with your situation and aspirations now, they can be prepared to put corrective actions into motion as soon as we know what the Budget holds. We’re seeing a huge uptick of activity as the end of the month approaches and, depending on the changes announced, there may well be a frenzy of demand for advice in the weeks and months following.
Don’t delay, take our online matching questionnaire to get connected to expert advisers and your tax fightback can start today.
Important information
The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment and financial planning decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.
