The waiting and the speculation are over, and we now know how the government intends to meet its public spending commitments.
The devil is always in the details when it comes to Budgets, and it may be some days before all the implications are known. However, you can be assured that a more detailed communication on how the announced changes will likely impact you and all my clients will follow over the next few days.
Having just listened to the speech, the headlines for financial planning clients appear to be as follows:
Capital Gains Tax (CGT)
CGT will rise from 20% to 24% at the higher tax rate.
The lower CGT rate will rise from 10% to 18%.
The new rules will come into effect on April 5, 2025, and are expected to raise £25 billion.
Under the current regime, higher-rate taxpayers pay 20% on gains from other assets and 24% on gains from selling a second property. The news, therefore, marks an increase of 4% for those making gains on share sales.
Under the new rules, Reeves has stated that the tax-free allowance will remain the same.
The annual allowance currently stands at £3,000 for individuals and £1,500 for Trusts, after Conservative Chancellor Jeremy Hunt used his 2022 Autumn Statement to cut the CGT threshold from £12,300 and £6150 respectively.
Gains on shares held in Pensions and ISAs remain exempt from CGT.
As the new rules do not come into effect until April 2025, an opportunity exists to sell assets before then and pay tax at the current rates, but this needs to be considered very carefully and on an individual basis. The tax increase is relatively modest, and there is always the danger of allowing the ‘tax tail to wag the dog’.
Inheritance Tax
For our clients, the most significant change announced in the Budget is likely to be the news that, with effect from April 2027, Pensions passed on will be subject to IHT.
Pensions are currently exempt from IHT and not classed as part of your estate when you die.
‘We will close the loophole created by the previous government, made even bigger when the lifetime allowance was abolished, by bringing inherited pensions into inheritance tax from April 2027,’ Reeves said.
The implications of this change are far-reaching, and I expect to write further when more details emerge.
I hope you found the above interesting. As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.
Yours sincerely,
Graham Ponting CFP Chartered MCSI
Managing Partner
