“Are You Ready? Important Actions to Consider Before the UK Budget on 30 October!”
Do You Need to Act Before the UK Budget Tax Update on 30 October 2024?
As the UK Budget approaches, many are considering potential tax changes in the upcoming UK Budget Tax Update and whether to take last-minute actions to safeguard their finances. This article highlights essential factors to keep in mind regarding these updates and offers practical advice on steps to take before the 30 October deadline.
What Taxes Might Increase After the UK Budget Tax Update?
Although the government has promised not to increase VAT, income tax, or employee national insurance, reports suggest they need to raise £25 billion a year in tax savings. Consequently, several taxes are rumoured to be targeted, including:
What Are the Current Capital Gains Tax Rates?
Capital gains tax is currently charged on profits above £3,000 per tax year at the following rates:
- Shares: 10% for basic rate taxpayers, 20% for higher rate taxpayers.
- Second properties: 18% for basic rate taxpayers, 24% for higher rate taxpayers.
These rates might increase following the UK Budget Tax Update, possibly with immediate effect after the Budget.
What Actions to Take for Capital Gains Tax?
- Dispose of shares with accrued gains to secure the current capital gains tax rate and use the £3,000 annual exemption.
- Transfer shares to a spouse, allowing both of you to use the exemption and potentially pay a lower tax rate.
- Move shares into a tax-free ISA, though note that this could trigger a capital gain.
- If you are in the process of arranging for your company to be struck off and have drafted/are drafting cessation accounts up to 30 September or prior, you should arrange for the funds to be withdrawn from the business bank account, since this is the date that will be deemed to be the distribution date for capital gains tax purposes.
What Are the Current Thresholds and Reliefs for Inheritance Tax?
Inheritance tax is currently set at 40%, and in many cases the estate value threshold is £500,000. This includes a tax-free threshold of £325,000 and an additional NIL rate band of £175,000 if you leave your home to children or grandchildren.
The UK Budget could affect annual gift exemptions and unrestricted lifetime gifts after the tax update. Current exemptions include:
- £3,000 per year in lump-sum gifts.
- Smaller gifts of up to £250 per recipient.
- Wedding gifts: £5,000 to a child, £2,500 to a grandchild.
- Unrestricted lifetime gifts, provided you live for at least seven years after making the gift.
What Actions Should You Take for Inheritance Tax?
- Utilize the £3,000 annual gift exemption for inheritance tax or double it if you didn’t use it in 2023/24 either.
- Use other gift allowances, such as £250 per person or wedding gift exemptions.
- Make larger lifetime gifts, which are currently excluded from your estate if you live for at least seven years after making the gift (it’s possible this period could be extended or some other restriction imposed).
What Changes Could Affect Pension Tax Relief?
Pension contributions may also be targeted. Currently, the annual allowance for contributions is £60,000, but this could be reduced. Additionally, tax relief on pensions might be restricted to the basic rate of 20%. There’s also speculation that the tax-free lump sum withdrawal limit of £268,275, available at age 55, might be reduced.
What Actions to Take for Pension Tax Relief?
- Top up your pension pot before the Budget to maximize current tax relief.
- Consider early withdrawal, particularly if you’re approaching retirement age and want to lock in the current tax-free lump sum allowance (do take advice before doing so).
Conclusion: Act Now to Prepare for Potential Tax Changes Following the UK Budget Tax Update
The UK Budget 30 October Tax Update could bring significant changes to tax reliefs and rates, particularly for capital gains, inheritance, and pensions. While there’s still time to act, reviewing your financial situation now and taking steps to minimize your tax exposure could help you stay ahead of any new legislation. Be sure to consult with a tax professional or your financial advisor for personalised advice.
Stay Ahead of the Changes!
Don’t wait until the UK Budget Tax Update takes effect! Reach out to COMPETEX today for expert guidance on the necessary steps you can take now to protect your finances. Our knowledgeable team is here to assist you with adapting to the new changes and ensuring you make informed decisions.
For further information or to discuss how we can support your financial needs, please reach out to us:
Email: info@competex.co.uk
Website: www.competex.co.uk