Preventive action ahead of the budget

aroominyork

Can we please have a little chat about what budget changes might come in overnight and so call for preventive action beforehand? The Times – not always technically on the button – today runs through possible changes and suggests the following:

CGT: “If you hold listed shares that have made a capital gain, you may want to sell them before the budget.”

IHT: “If you are thinking about making a gift to a child or grandchild, do it before October 30.”

Pension tax relief: “If you are a higher rate taxpayer and planning to pay extra into your pension in this tax year, you should do it before October 30.”

Fuel duty: “Make sure to fill up your tank before October 30.” OK – that one I get!

It seems to me that many of these, if implemented from say 1 November, would amount to retrospective taxation. For example, increasing CGT rates would affect shares sold April-October; removing higher rate tax relief on pension contributions would affect contributions made April-October on the expectation of receiving higher rate relief. Or could the tax year be divided into two separately taxed periods?

subjecttocontract

Well the fuel duty one is hardly worth worrying about, 5p or 10p a litre extra might save you £5 by topping up the day before but I'll probably be doing something far more important than that.

I've stocked up on alcoholic drinks so we can at least get drunk and make the pain go away for a few hours.

Albermarle

As discussed in other threads at length, changing pension arrangements is not simple to implement. Any changes will be more likely to come in for 26/27 .

masonic

On the pensions one, they would effectively need to abolish salary sacrifice, which they would be unable to do retrospectively (and I very much doubt they will be looking to do at all). For capital gains, there is an argument for making any changes take effect from April 2025. This would encourage people to make disposals and improve the short term tax take. If they made it retrospective or immediate, then people may just hold on to their gains for a few more years and see what happens.

You can probably add 'refrain from using any aggressive tax avoidance schemes' to the list.

aroominyork

masonic said:

On the pensions one, they would effectively need to abolish salary sacrifice, which they would be unable to do retrospectively (and I very much doubt they will be looking to do at all). For capital gains, there is an argument for making any changes take effect from April 2025. This would encourage people to make disposals and improve the short term tax take. If they made it retrospective or immediate, then people may just hold on to their gains for a few more years and see what happens.

You can probably add 'refrain from using any aggressive tax avoidance schemes' to the list.

Salary sacrifice has always seemed ugly to me; a loophole some can crawl through and which has unintended consequences (eg lower salary can affect credit rating, future salary negotiations etc.). Is it not logical to align whether or not workplace pensions contributions attract NIC, no matter whether employer or employee makes them?

wmb194

aroominyork said:

Can we please have a little chat about what budget changes might come in overnight and so call for preventive action beforehand? The Times – not always technically on the button – today runs through possible changes and suggests the following:

CGT: “If you hold listed shares that have made a capital gain, you may want to sell them before the budget.”

IHT: “If you are thinking about making a gift to a child or grandchild, do it before October 30.”

Pension tax relief: “If you are a higher rate taxpayer and planning to pay extra into your pension in this tax year, you should do it before October 30.”

Fuel duty: “Make sure to fill up your tank before October 30.” OK – that one I get!

It seems to me that many of these, if implemented from say 1 November, would amount to retrospective taxation. For example, increasing CGT rates would affect shares sold April-October; removing higher rate tax relief on pension contributions would affect contributions made April-October on the expectation of receiving higher rate relief. Or could the tax year be divided into two separately taxed periods?

On CGT, the rate can be changed mid-year and it happened in 2010. For higher rate taxpayers there were two rates in the year that depended on the date of the disposal. The emergency budget was on 22/06/10 so the changes weren't retrospective.



https://taxscape.deloitte.com/taxtables/tax-rates-2010-11-emergency-budget-update.pdf

Recent discussion:

https://forums.moneysavingexpert.com/discussion/6539745/can-capital-gains-tax-rate-increase-mid-tax-year/p1

wmb194

Probably low probability mid-year but you could add to the list a reduction in the annual Isa contribution amount.

subjecttocontract

It's not just ISA contributions.......as they are looking to fill a £22 billion black hole id suggest any tax rises/fees anywhere ( except income tax, vat & NI ) are a possibility. Road tax, licences, passports, APT etc, even totally new taxes could be introduced.

BCE1200

One question that I see over 55s discussing is whether to grab the 25% tax free pension amount before October.

I don't think that hitting SalSac would raise as much tax as expected, owing to behavioural effects.  

masonic

aroominyork said:

masonic said:

On the pensions one, they would effectively need to abolish salary sacrifice, which they would be unable to do retrospectively (and I very much doubt they will be looking to do at all). For capital gains, there is an argument for making any changes take effect from April 2025. This would encourage people to make disposals and improve the short term tax take. If they made it retrospective or immediate, then people may just hold on to their gains for a few more years and see what happens.

You can probably add 'refrain from using any aggressive tax avoidance schemes' to the list.

Salary sacrifice has always seemed ugly to me; a loophole some can crawl through and which has unintended consequences (eg lower salary can affect credit rating, future salary negotiations etc.). Is it not logical to align whether or not workplace pensions contributions attract NIC, no matter whether employer or employee makes them?

Employee contributions that attract NIC relief would be nicer for some employees, because they may not be able to salary sacrifice. There is also a saving in employer NIC (kept by the employer, or passed to the employee), so that would still be a good reason to SS, unless this benefit was added on to employee net pay contribution tax relief too. How likely do you think it is that future net pay pension contributions will receive any extra tax relief to account for this? So that would only leave the option of alignment through all forms of pension contribution being net of NIC. In practice that is not something that would be easy to achieve, even if desirable. This would also mainly disadvantage low-middle earners, since the higher rate of NIC is negligible and that's something they've committed not to change.

The AA and LTA would be easier targets, but who knows?

clive0510

BCE1200 said:

One question that I see over 55s discussing is whether to grab the 25% tax free pension amount before October.

I don't think that hitting SalSac would raise as much tax as expected, owing to behavioural effects.  

with reference to the 25% question, if I was to draw that from my pension in the hope of avoiding the taxman, where would be the best place to put that money? all ready maxed out on isa allowance.