Keeping abreast of the Budget speculation could pay dividends - Alastair Lindsay

Most of what we know is based on Labour’s election manifesto, which rules out increases in tax for ‘working people’ including income tax, national insurance contributions and VAT. Increases to corporation tax above 25 per cent have also been ruled out. However, it has so far been silent on wealth – Capital Gains Tax (CGT) and Inheritance Tax (IHT) – and investment taxes, so there is potential for change.

It’s widely acknowledged that tax increases may be necessary to help address fiscal challenges. Yet, because of a commitment to ‘undertake a review of the pension landscape’ there are unlikely to be any immediate changes to the annual allowance or the availability of tax relief. The government has previously stated that it doesn’t intend to change tax-free cash on pensions and Chancellor Rachel Reeves has also said that there is no plan to curb tax relief or for an immediate reinstatement of the Lifetime Allowance.

Given the warnings of tax increases, there is understandable concern that changes to CGT may be introduced. One question increasingly being asked is whether it can be changed halfway through a tax year, or whether the change will be deferred until next April.

For individuals and trusts, CGT is generally accounted for on a tax-year basis, so a mid-year change causes none of the disruption that would be associated with doing likewise for income tax. Even residential property sales have a 60-day period for reporting and payment.

One of the major triggers of CGT is the sale of business assets and currently up to £1 million of gains from the disposal of an interest in a qualifying business would be taxed at the lower rate of 10 per cent. Whilst this could feature in the Autumn Statement, it’s not thought to be a major target given the generally accepted importance of encouraging small businesses.

The forewarning of tax increases, countered by the promise to not impact working people, has also led to speculation regarding IHT changes. But exactly if, what and how is not yet clear.

It is perhaps unsurprising that there is some talk of the introduction of a separate wealth tax. The government has not indicated that this is part of its plans, but recent speculation has raised the topic. A wealth tax could be complex to create for a variety of reasons, not least due to the challenges of asset valuation and liquidity to pay the tax.

Whilst we can never be certain about what might be in the Budget most expect a wealth tax to remain on the sidelines, despite, the latest rumblings. More likely is higher taxes on capital in the form of CGT and IHT, as has been widely forecast. An indirect wealth tax on residential property, through a reform of council tax, is also a possibility.

With changes on the horizon, consider reviewing your financial plans and try to maximise any tax allowances available to you, seeking specialist financial advice about pension and ISA contributions, as well as how CGT may impact your situation. Uncertainty can be unnerving, but it’s important to remember that change – to your aspirations, your circumstances and legislation – is constant.

Alastair Lindsay is managing partner, Gilson Gray Financial Management