71% think tax allowances will change
The majority of voters thought we would see a change to tax allowances. Read our considerations below:
Capital Gains Tax (CGT)
CGT is already a complex tax that catches many people unawares, particularly when they make gifts of assets to family members. That complexity gives the Chancellor a number of options – the thresholds could increase and/or be aligned to income tax, the annual exempt amount could decrease or even be removed altogether, the exemption from CGT on homes could be removed, the CGT treatment of assets on death could change – the list could go on. Making the most of the current rates and allowances for as long as they remain in force will be key so consider use of the annual exempt amount through gifting, splitting ownership between spouses/civil partners, effectively managing gains in your investments or making use of investments that do not fall within the CGT regime.
Inheritance Tax (IHT)
According to HMRC, inheritance tax brings in the least of the tax revenues and therefore is an area where increasing the tax take could be attractive. The chancellor might look at removing or reducing the nil-rate band (currently £325,000), he could change the rate of IHT on lifetime gifts or restrict those gifts that do not result in an immediate IHT charge or he could remove or limit/remove some of the IHT reliefs such as business and agricultural property relief. Anyone considering making lifetime gifts could benefit from gifting sooner rather than later and making sure that your succession planning through your Will and death benefit nominations ensures you are being as tax efficient as possible.
Laws and tax rules may change in the future. Your own circumstances also have an impact on tax treatment.
Pension taxes –LTA and AA
For those concerned that we could see less tax relief on pension contributions or higher taxes on the funds accumulated, you may wish to consider your level of contributions to check they are maximising what will be available to you in retirement. Be sure to speak with your financial Planner before making any changes to your contributions if you think you may be impacted by the annual or lifetime allowance.
16% think income tax will change
Although the Conservatives pledged not to raise income tax, the uncertainty and huge cost of the COVID-19 pandemic could see this pledge broken. And with Income Tax being a quick way of raising revenue and replenishing the coffers, it is unsurprising that 16% of you think that this is a possibility.
It’s possible that the Chancellor could lower or abolish the personal allowance (currently £12,500) or change the rates for different levels and types of income.
That means that it’s worth considering if you are maximising any contributions through your employer's pension scheme to make use of current rates of tax relief and checking that you have made use of investment solutions that can support your lifestyle without resulting in an income tax liability, such as Individual Savings Accounts (ISAs).
The value of your investments can go down as well as up and you may get back less than you paid in.
10% think we will see the introduction of a new wealth tax
Although the Conservatives have traditionally rejected this idea, introducing a new wealth tax has been discussed at length in the media. It could be a one-off tax or an ongoing levy - one suggestion has been to tax households with over a £1m threshold an extra 1% over five years.
Should a new wealth tax be introduced and you stand to be affected, speak with your Financial Planner. They will help you understand the extent of any potential impact and whether there are planning steps you can take before it comes into force to minimise that impact.
2% thought that more support for the retired would be introduced
Although low on the prediction list, this is something we would like to see. Throughout the pandemic there has been much support for the employed and we are keen to see that the government has not forgotten about our retired population. If you are worried about your retirement savings, please do not hesitate to get in touch with your financial planner.
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