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It’s Groundhog Day…here I am again, writing (still from home) in advance of a Budget, speculating on the Chancellor’s likely announcements.

I recently chaired a tax forum for Accelerate, the community of independent accountancy firms that Sagars is part of, where I took part in discussing the hot tax topics of the day with my fellow professionals (sorry – its invitation only 😊). The Budget was our main consideration…

Speculation

Until we hear what Rishi Sunak has to say, the speculation remains just that, but along similar lines to last year, most of the supposition is around potential increases to Capital Gains Tax (CGT). With this in mind, and as a precaution, it is worth considering whether you can realise a gain on any asset before 3 March. As well as possible changes to the main rate of CGT, it is believed that Business Asset Disposal Relief (formerly Entrepreneurs’ relief) could be one of the Chancellor’s targets. This relief reduces the rate of CGT from 20% to 10% on qualifying assets, for lifetime gains up to £1m.

Whilst the triple lock pledge not to increase VAT, income tax or national insurance has been talked about, you do have to wonder if an increase in dividend tax rates might still be contemplated. If you are thinking of declaring a large dividend before 5 April, it would be sensible to do this before 3 March if at all possible.
Pension contributions always feature in pre-Budget speculation so again, taking action before 3 March is the suggestion if you want to pay a lump sum into your pension.

Wealth tax

At the Accelerate meeting I mentioned earlier, we discussed whether a wealth tax looked likely. This is one of those subjects that has been widely reported in the press, and perhaps the deficit faced by the country will ultimately lead to the introduction of such a tax. However, we’re finding that HMRC are struggling to deliver timely services around legislation that has been in force for years, so their capacity to cope with a whole new tax which could affect quite a number of individuals is questionable.

Perhaps we might expect Mr Sunak to focus his efforts on a tax raid of the big online retailers instead?

If a wealth tax is introduced, it might well deliver a windfall of tax for the coffers, but those facing it will no doubt undertake planning to mitigate what they can. Indeed, we are often asked how to mitigate this theoretical wealth tax. The obvious answer is to give assets away, but that in itself may trigger tax as you might pay CGT on making a gift (unless for example it is cash) and there could be potential exposure to Inheritance Tax too. So that brings us back to my starting point which is that if you are concerned about increases in Capital Gains Tax and intend to realise a gain soon, try and do so before 3 March.

And so the conjecture goes on…

Do keep in mind that this is not specific advice, I strongly recommend that you seek a detailed professional opinion about your own personal affairs before taking any action. Please get in touch with me by email or contact your usual Sagars team member.

Kate Naylor
Kate Naylor

Business Tax Partner

Kate spends a lot of time working with businesses and their owners on tax strategies and mitigation, which includes looking at the business and its structure, through to the owners personal tax situation and their longer term goals and plans.

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