What does new Govt mean for financial planners?
Tags: Financial Advice, Financial Advisor, Income Tax, Pensions
The new Chancellor George Osborne, and the Chief Secretary to the Treasury, David Laws, have made it clear this week that the need to get the budget deficit under control ‘overshadows everything’.
Some spending cuts have already been announced (all ministers are taking a 5% pay cut) but the scale of the national debt means much tougher measures are needed to balance the books.
We’ve been told capital gains tax will rise. An emergency Budget is scheduled for 22 June when further tax rises could be announced. Here’s what we know so far.
Capital gains tax
The CGT rate might rise from the current flat rate of 18% and the annual £10,100 exemption could be reduced.
The Times has been reporting that anxious investors are preparing to offload second homes and shares in an attempt to avoid the tax. They report Savills seeing a 40 percent increase in valuation enquiries in the last 10 days.
This means any tax shelters, such as ISAs, pensions (including SIPPs) and, for more adventurous investors, VCTs will become even more valuable. Within an ISA or SIPP all gains are tax-free.
Income tax
It looks likely the tax free personal allowance for those earning less than £100,000 will rise to £10,000 over time, but the 50% tax rate for those earning over £150,000 will remain.
Tax relief on pensions
The Tories are happy with the current system, whilst the Lib Dems want to abolish higher rate tax relief. It may be that higher rate taxpayers who are considering making a pension contribution this tax year might want to bring forward contributions.
Act now – secure your tax shelters
We believe it is vital that investors organise their affairs as tax-efficiently as possible – and do so now. Changes in tax are rarely retrospective. No one can say for certain what will happen, but investors might want to play it safe by making use of your ISA and pension allowances sooner rather than later. (for investors worried about CGT using their SIPP as part of their tax planning may prove particularly attractive at this time)
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