October budget update from Roake & Cook

At this stage, everyone is purely speculating as to what tax changes will be announced in October. The Labour government have pledged not to increase Income Tax, National Insurance or VAT, but it is likely that we could see changes to both Inheritance Tax (IHT) and Capital Gains Tax (CGT).

If there are changes to Income Tax and/or National Insurance, it is likely that these would be in the form of freezing, or increasing, the tax rate bands. With inflation, that would push more people into higher tax bands, without them announcing an increase in tax rates.

Any changes to Employer’s National Insurance would be extremely unwelcome, especially considering the increased burden placed on employers in recent years.

Speculation is that certain IHT reliefs could be capped or even removed. Qualifying businesses can currently receive up to 100% relief on IHT, when passing down business assets on death. Speculation is that relief could be capped to £500,000 per person, with amounts over this rate being subject to tax at 40%. A more extreme move would be to remove these reliefs altogether, which would be a significant blow to family-owned businesses and farms (who currently receive Agricultural Property Relief).

Rumours around CGT are that rates would move in line with current Income Tax rates. It would be no surprise to see this introduced, meaning the sale of second properties, shares, and other chargeable assets could see tax rates of 40%/45% (by higher rate taxpayers), rather than the current rates of 24% (residential property) or 20%.

Business Asset Disposal Relief (BADR) currently allows qualifying taxpayers to benefit from a CGT rate of 10%, rather than 20%, on the sale of certain business assets. Removing this relief would be a major blow to small business owners when they look to sell.

As you can see, changes could have a serious impact on anyone looking to sell, or pass on, business or residential assets in the near future. As stated, these changes are purely speculation at this stage, but the government have stated the budget will be ‘painful’, so expect to see some significant tax changes.

If you believe these could impact you or your business, it is best to speak to your advisor as soon as possible, to see if any tax planning can be done before changes come into effect.

Martin Cook

Director

Roake & Cook Limited