As we approach the upcoming Autumn Budget on 30 October 2024, it is clear there are going to be some significant changes with the Prime Minister, Keir Starmer, stating that “it will be painful”. There are several key areas that individuals and businesses should consider to prepare for potential tax changes. Neal Groves, Partner and Head of Personal Tax at Beavis Morgan, offers some insights into what we might expect and thoughts on areas for strategic planning ahead.
Personal Tax Considerations
- Capital Gains Tax (CGT): There is ongoing speculation about increases to CGT rates or the elimination of certain reliefs. Individuals considering asset disposals should evaluate the timing and structure of these transactions, potentially accelerating significant or deferred gains to capitalize on the current tax regime before changes are implemented. For example, if you were considering selling an asset in the coming year, then you may wish to talk about ways of bringing forward the disposal and “banking” the current rates of tax.
- Pension Contributions: Changes in pension regulations are a common topic around Budget announcements. There are rumoured changes to the amount of tax relief available on pension contributions for higher earners and possibly also to the amount of the 25% tax free lump sum available on withdrawals from a pension pot. Maximising your pension contributions before any potential decrease in allowances could be beneficial.
- Inheritance Tax (IHT): Expected reforms might significantly impact estate planning. It’s advisable to review and structure one’s estate plans to mitigate future tax liabilities.
- Personal Allowances and Tax Bands: Changes to personal tax allowances or tax band thresholds (including freezing the tax bands) could affect your tax liabilities, especially for those near these limits. Strategic planning around income could be crucial to mitigate against unexpected liabilities.
- Dividend Tax: With recent reductions in the dividend allowance and discussions about further cuts or adjustments to rates, it’s crucial to plan carefully around dividend income. This is particularly important for investors close to the higher tax brackets, or not fully utilising the lower brackets.
Business Tax Considerations
- Corporate Tax Adjustments: Businesses might see adjustments in tax rates or reliefs, which could significantly impact corporate tax strategies. Flexibility in reassessing tax positions pre and post-Budget is key. This can cover a multitude of areas and structures, and also the timing of investment decisions. For example, did you know that, if a trading company sells a qualifying investment in another trading company then it doesn’t pay any tax.
- Furnished Holiday Lets (FHL): Changes starting from April 2025, including the removal of some valuable reliefs and restrictions on Business Asset Disposal Relief (BADR), may impact the profitability of those in the holiday let sector. Preparing for these changes is crucial.
- Gift Holdover Relief: This relief, allowing the deferral of CGT on business assets gifted, might be targeted as the government looks for immediate revenue sources. Accelerating gifting plans could secure current tax advantages.
- Digital Taxation Advances: The shift towards Making Tax Digital underscores the need for businesses to ensure their systems and processes comply with new digital tax requirements.
Additional Anticipated Changes
- VAT and Private School Fees: The government plans to charge VAT on private school fees, impacting the cost of private education from January 2025. This excludes pupils with acute special needs.
- Non-UK Domiciled Individuals: Changes from April 2025 will affect the taxation of non-UK domiciled individuals, removing the remittance basis of tax and implementing a residence-based system. Is it right to remain within the UK tax system?
- Carried Interest Taxation: A review of the tax treatment of carried interest is underway, potentially affecting fund managers in private equity.
- Pillar 2 and Anti-Arbitrage Rule: New rules aim to prevent tax avoidance that exploits differences between tax and accounting rules.
Neal Groves advises: “With significant changes potentially on the horizon, it’s vital to engage with your tax advisor. Proactive planning and early consultation can help navigate these changes, mitigating risks and capitalising on opportunities presented by new tax measures.”
How Beavis Morgan Can Assist
Our team is closely monitoring developments leading up to the Budget and is ready to offer tailored advice considering the anticipated changes. We are equipped to provide strategic guidance to ensure that both individuals and businesses are well-positioned to adapt to the new tax rules.
For personalised advice and to discuss how the upcoming tax changes might impact you, please contact your usual Beavis Morgan relationship partner or Neal Groves. Detailed updates and further analysis will be provided following the Budget announcement.
Neal Groves
T: 07442 929736 | E. neal.groves@beavismorgan.com