What the Budget might hold for you and your business
Business owners facing critical decisions around the October Budget should not rush into over-hasty actions, tax partner Nick Latimer at the Cheltenham office of national audit, tax, advisory and risk firm Crowe is warning.
He said: “There is much speculation in the press about whether and how the government might raise taxes while keeping within both manifesto promises and statements not to raise taxes on working people.
“Many are wondering what taxes are in line for reform. There can be no certainties in this type of future gazing – there are many possibilities, which is why many will be paying close attention on Budget day.”
He pointed out that the new Prime Minister Sir Kier Starmer has warned that the October Budget will be painful, but the detail on what this means in practice has yet to be announced.
It is, however, likely that those with independent wealth will be affected as Capital Gains Tax and Inheritance Tax are rumoured to be very much on the agenda.
Mr Latimer highlighted key considerations for:
• Capital Gains Tax (CGT) – While CGT does not raise a huge amount of tax (£14.4 billion in 2023) it is straightforward to change. A simple uplift to the rate could be implemented quickly –this has happened before with effect from Budget day. The concern is then whether there will still be relief for businesses on gifts or sale.
• Inheritance Tax (IHT) – IHT reform was last considered in 2019. There could be a rate increase here, or removal or restriction of some of the reliefs available. Business Relief and Agricultural Relief are very valuable and important for intergenerational family businesses. A big concern is that these reliefs will be removed or restricted, making succession planning a costly exercise
• Pensions and investments – Tax relief on pension contributions could also be targeted, restricting tax relief to basic rate (20%) only. A review of the tax-free status of the fund for IHT should also not be ruled out, as well as a restriction on the tax-free lump sum. Possible restrictions to ISA allowance could also be considered.
• Income tax – What is not likely to change are income tax rates and reliefs. Fiscal drag is continuing to increase revenue, bringing more people into the tax net and higher rate bands as the years progress. There could be a reduction in thresholds, or the level at which the personal allowance is abated.
• Mr Latimer said that Crowe had specific advice for non-domiciled individuals, business owners and entrepreneurs, residential property landlords and partners and professional services firms, with full details available at https://www.crowe.com/uk/insights/pre-autumn-budget-2024-individuals-and-firms
He added: “It is tempting to make decisions now and hope that they fall within rules that we are familiar with but with any transfer of wealth there are always considerations beyond tax that are equally, if not more, important – family dynamics and asset protection for example should always be top of the agenda of any discussion around wealth planning.
“Discuss your options now with your advisor and your family and start working out what you want to achieve. The tax situation should then follow that plan.
“Tax is a complex subject, and this article is intended to provide a simplification and raise awareness of the main issues in advance of the Budget. When contemplating transactions of any kind, you should always seek tax advice so it is specific to your circumstances.”
Nick Latimer can be contacted at nick.latimer@crowe.co.uk or by calling 01242 232241.
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