…. and, all through the house – many are stirring, even the mice!

As predicted, it’s a landslide victory for The Labour Party.  The new Parliament will meet next Tuesday to elect a Speaker.  The State Opening of Parliament and the King’s Speech will follow the week after.    

Knowing that our new Prime Minister has pledged not to deviate from his manifesto, we should expect a Budget in November.  More often than not, new tax laws announced are introduced sometime in the future but anti-forestalling legislation may trap the unwary. 

So, what should we all be thinking about now? 

Capital Gains Tax (CGT)

Nothing was mentioned in Labour’s manifesto about increasing CGT.  However, you may want to consider:

  • Gifting a share of your investment property to the next generation to ‘lock in’ the current CGT rate of 24%. 
  • Reducing your CGT rate further by crystalising losses on assets of negligible value or utilising capital losses previously realised by your spouse or civil partner.   Don’t forget that the transfers of assets between spouses/civil partners are tax free so make sure the gains and losses are being realised by the same individual!
  • If you regularly access your capital as part of your cash flow management and pay CGT at 20% on gains realised, should you bank more gains now?  With the help of your financial adviser (IFA), should you consider rebalancing your investment portfolio? 

However, if you’re not likely to need access to your capital for the foreseeable future and are concerned about your future needs, the current CGT free uplift of assets to their market value on death is extremely valuable. But is this relief here to stay?

Income Tax

We’re all suffering from fiscal drag and are paying more Income Tax.  It’s not likely to get any better. Until we know more, think about:

  • Transferring assets between spouses/civil partners to make best use of available allowances and lower rates of tax.
  • Utilising your £20,000 2024/25 ISA allowances to generate tax-free income and Capital Gains
  • Consider investing for the family in Junior ISAs (£9,000/yr) or Junior pensions (£2,880/yr with the government adding a further £720) – bearing in mind that such an investment is likely to be regarded as an Inheritance Tax “Potentially Exempt Transfer”, after IHT exemptions have been deducted.  However, if you have significant income and commit to such contributions annually, these gifts could be exempt from IHT from the outset.  
  • With the help of an IFA;
    • investing in Venture Capital Trusts (VCTs) or subscribing for shares in qualifying Enterprise Investment Scheme (EIS) companies to bank 30% Income Tax relief and other tax benefits.
    • considering other investments such as investment bonds or Discounted Gift Trusts (the latter could also provide you with an immediate IHT saving too)  
  • If you pay Income Tax at 40 or 45%, tick that ‘Gift Aid’ box when making charitable donations to claim additional tax relief.
  • Sacrificing salary or bonuses to make additional pension contributions via your employer to save Income Tax at your highest rate (which if you earn in excess of £100k, could be as much as 60%) and National Insurance.  Your employer will also save 13.8% National insurance too!

There are a myriad of opportunities out there which, with careful thought and planning, will save you tax.  Remember those famous words ‘in this world nothing can be said to be certain, except death and taxes’, but please, don’t let the tax tail wag the commercial dog – seek professional advice by speaking to  one of our tax advisers on 01223 810100 and your IFA.