Jackie Hall

Written by: Jackie Hall

Jackie Hall

Partner

Budget silence on capital taxes

Before the Chancellor delivered his Budget on Wednesday 27 October, speculation about increases in capital gains tax (CGT) rates, restrictions on inheritance tax (IHT) reliefs and even the possibility of a wealth tax, was rife.  

In the end those concerns were unfounded – for the time being at least – with not even a mention of a wealth tax or IHT in the Chancellor’s speech, and the only reference to CGT in the Budget papers being a relaxation in the deadline for reporting on certain property disposals. As a result, private clients and their advisers may have been left with that ‘silence is golden’ feeling. The Chancellor’s clearly stated goal is to reduce taxes, and with that in mind it may now be considered unlikely that we will see any significant changes to the structure of capital taxes this side of the next general election. 

Families who are taking a responsible approach to intergenerational planning, the use of their pension funds and to expenditure during their retirement years, may be relieved to know that they will not immediately have to change their plans or their wills to reflect capital tax changes. But it is probably best to approach the absence of immediate changes to capital taxes as a welcome breathing space rather than an indication that there is no need to consider any future action on wealth planning. Now is probably not the time to relax completely as inaction and inadequate planning could still be costly in the long run.

So, having breathed that huge sigh of relief, perhaps now is the time to consider the ‘what if?’ What if the public finances were to slip out of the Chancellor’s control? If that were to happen capital tax changes in the relatively short term may still be inevitable. What if those changes included aligning CGT and income tax rates for example? With estimates that taxing capital gains at income tax rates might raise as much as £16bn per year, that’s a tempting option for a chancellor struggling to balance the economy. And what if those valuable reliefs and exemptions currently available were to be withdrawn? Surely now is the time to focus attention on banking reliefs, exemptions and potentially lower rates, where appropriate, whilst they are still available. Capital taxes planning should never be far off the agenda for wealthy individuals and families. So, take a little time, plan carefully – but don’t just think the spectre of capital taxes has gone away – in the long run it hasn’t.

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