People tax planning in Cheshire and across the UK will be paying close attention to the budget on October 30.
The government has hinted at tax rises in its bid to plug a ‘black hole’ in the nation’s finances. Although income tax, National Insurance and VAT rises have been ruled out, speculation is mounting about what other increases will be announced by the Chancellor of the Exchequer Rachel Reeves.
One possible target may be Capital Gains Tax (CGT). This duty depends on an individual’s tax bracket and the type of asset transaction, where profits exceed the annual £3,000 tax-free allowance. This can impact investments, with the sale of second homes falling within the CGT net. Reeves may opt to increase the tax-free allowance or bring CGT in line with Income Tax.
Alternatively, she may hike up inheritance tax, which at 40% is currently charged above an individual net rate threshold of £325,000, or inheritance tax relief, which covers everything from weddings and business assets to farmland and AIM-listed shares. The Chancellor may choose to increase the overall rate of inheritance tax or target current relief on inherited assets.
Pension pots currently fall outside the inheritance tax net and could also provide an additional source of revenue. Reeves is understood to be considering a flat 30% rate of pension tax relief, following recent data showing the cost of providing this tax relief rose to £48.7 billion in 2022/23.
One other area of consideration may be further taxation on dividends, which has doubled over the past three years as the threshold has dropped. These are all likely to be considerations as the Treasury weighs up its fiscal goals.
