Team No Comments

We have had a lot of media speculation over the last few weeks about what we might get in the Budget.  I’ve been on a variety of webinars over the last few weeks that have covered politics in the UK and potential changes in the Budget.

The latest webinar was for 1.5 hours this morning from M & G Wealth, their senior technical manager and their political guru.

They opened with ‘Prioritise any tax rises on wealth and corporations – but there are no low hanging fruit.’

In addition, they made the general point ‘You should only advise on facts.’  It is difficult to advise on what might happen.

Media speculation could be higher than normal because it has taken longer than average for the Budget to be held after the election.   The media has had longer to dwell on things.

Key points covered this morning:

  1. Changes in the Budget can be applied on the day, on the following 6th of April, or take longer to implement if they could be complicated and/or be difficult to implement
  2. Changes need to be approved in a Finance Bill that can take 3 to 4 months to implement
  3. However, some changes are made immediately, and the Finance Bill is then backdated
  4. Tax reliefs for pension contributions are unlikely to change on Budget day.  This could take a year or two to implement
  5. If you are going to make sizeable pension contributions why wait?
  6. Tax free cash and tax relief are incentives to funding pensions.  We need more pension funding not less
  7. On pensions tax free cash withdrawals:  That is not something that can change immediately.  I can’t see it happening, but if it did there would be some sort of protection, otherwise it would be illegal and totally shatter confidence in the pension system.  Nobody should be rushing to take it (tax free cash) before 30th October
  8. They continued ‘I’d bet that the taxation of pension death benefits is the most likely thing to change.  I don’t think they’ll put pensions into inheritance tax.’
  9. On lowering the Personal Allowance threshold from £100,000.00:  I don’t think it will happen for political reasons.  Lowering it is inconsistent with being aspirational
  10. On changing Capital Gains Tax rates:  HMRC think changes could cost them money, behaviours would change
  11. Entrepreneurs relief is more likely to get looked at (on the sale of a business)
  12. The Capital Gains Tax uplift on death is more likely to be looked at
  13. Maybe we will get a small increase in (capital gains tax) rates
  14. Anything that makes Capital Gains Tax worse, by definition, means you should use more tax wrappers (pensions and ISAs etc.)
  15. Inheritance tax politically is the least popular tax.  They (Labour) will be very concerned with the optics of it
  16. Things like gift allowances, thresholds could change on the 6th April.  IHT gifting could be more of a consultation
  17. On Business Relief:  There is speculation they might take it away in AIM shares
  18. An employer’s National Insurance increase is very likely
  19. They could put employer NI in place on employer pension contributions too.  This would impact on Salary Exchange/Salary Sacrifice schemes for pensions
  20. Will Labour reverse Jeremy Hunt’s cuts to employee NI contributions?  Not now, it would be a breach of the manifesto commitment.  Less likely now, one to watch next time
  21. On a Wealth or Land tax:  A Swiss style wealth tax is very unlikely.  The obvious thing to do is re-value council tax bands
  22. Will Labour increase dividend tax?  Perhaps.  They are going to publish a business tax review and a tax road map

Comment

A key point to note right now is that we know what the rules are today.  If you have any headroom and the capacity to fund pensions and ISAs etc. now, then you should.

It is a difficult balancing act for Labour, they are trying to portray themselves as a party to grow the UK economy, and yet, some of the more likely changes like increases in employer’s NI contributions, will only slow down growth. 

As ever, plenty to think about before the Budget.  The best course of action for now is to do nothing, wait and see what we get on Budget day.  Once we know what we have got, and seen the technical detail of the Budget, we can start to revise plans and strategies if appropriate, over the long term.

Interesting times – again!

Steve Speed

17/10/2024