Pre-Budget Tax Planning Ideas

We share our pre-Budget tax planning ideas, as the first Labour Budget is now only 5 weeks away (30^th October). There is currently a lot of speculation of adverse tax changes that the business community and private tax clients should expect. Unfortunately, we have no inside knowledge of what Rachel Reeves will say. However, as with all tax planning, it often makes sense to bring forward and take precautionary actions if you were going to do them later anyway, and/or if there are non-tax reasons that such actions are in your best interests (eg asset protection, succession, business exiting, etc).

Historically, most changes to period taxes (e.g. Income Tax, National Insurance Contributions (NIC) and Corporation Tax) are effective from the next 1^st or 6^th April. However, the two recent NIC changes did not follow this principle. Changes to ‘transaction’ taxes (e.g. Capital Gains Tax (CGT), Inheritance Tax and VAT) have historically been effective from a mixture of midnight Budget day or the start of the next tax year. To summarise, it may be worth taking actions before Budget day, or taking such a ‘gamble’ before you know the change you are hedging against may be unnecessary.

If you do wish to protect your position, actions you may wish to consider include:

Capital Gains Tax

• Selling an asset now to lock a gain into an existing low CGT rate (0%, 10%, 18%, 20% or 24%). As well as a sale to a third party, such a disposal could also be triggered by a gift to a non-spouse relative (including covering by making a holdover relief election for business trading assets. Such tax elections can be made later, after the Budget), a transfer to a controlled business, a transfer into trust or a company purchase of own shares or liquidation.
• Selling an asset now to crystallise the current CGT loss relief position.

Inheritance Tax

• Making gifts (particularly if covered by an IHT relief).
• Making inter-spouse transfers of chargeable assets, particularly where one spouse’s health/life expectancy may be shorter, in order to ‘bank’ a higher tax-free uplift on death.
• Converting a trading company into a family investment company.

Income Tax

• Maximising contributions (personal or employer) into a pension.

National Insurance Contributions

• Bringing forward payment of salary and bonuses.

Get In Touch

Tax planning is currently less clear cut than usual. Contact your local Whitings office today to discuss how any actions that may appeal would work in your circumstances.

Disclaimer - All information in this post was correct at time of writing.