Well, its happened the Budget and just a day before Halloween!
I can confirm it was spooky and all is not good, here I give a brief overview of the main points and how it will impact us all.
With the continued freezing of personal income tax allowances until 2028 (if they keep to their promise) and IHT, fiscal drag will mean more people pay higher taxes as wages increase and estates grow in value?
So lets get down to the main points:
Income Tax
No change to income tax thresholds or rates, however the personal allowance will rise by inflation from April 2028. This was expected as there was a manifesto pledge not to increase tax, employee NIC and VAT.
Employer National Insurance
Now I know this is not a direct personal tax but it will impact us all.
This rate has increased from 13.8% to 15%. At the same time the income level at which the employer will start to pay this has decreased.
The big argument about this is does it break the Labour Party election promise not to raise taxes on employees, but the fact remains this is a massive increase and is expected to bring in about £25bn a year.
This will increase costs to business and so will be passed on, increasing the costs of goods and services for us all. It is also likely to impact pay rises a bit of a double whammy.
Stamp Duty
The surcharge for second properties will increase from 3% to 5% immediately, although there will be transitional relief if contracts are exchanged before the budget and completion will take place after the budget.
This will mostly affect residential landlords and be seen as another attack on them following earlier changes to mortgage interest allowances, and the forthcoming Renters’ Reform Bill.
Capital Gains Tax
Residential property is already taxed at 18%/24% and now all other assets will be charged at the same rate, again the change is immediate with relief similar to that for Stamp Duty!
The immediate implementation reduces the consequences for businesses. The sudden sale of their shares would increase supply and lead to a fall in their value, thus leading to a decrease in the company value, and affect their ability to raise capital.
Inheritance Tax
IHT nil rate bands remain frozen and will remain so until 2030. This means that the nil rate band will have been at £325,000 since 2009. If it had increased with inflation over the years it would now be worth over £500,000!
The relief for Business and Agricultural property will change, rather than being exempt the first £1m will be tax-free with the balance taxable at 20%.
Unlisted shares and those in the AIM will lose their tax-free status and be taxed at 20%.
The above two changes will come into effect from April 2026.
Drum Roll & Finally
The biggest surprise is the taxation of pensions. Unused benefits and death benefits will now fall under the scope of IHT from April 2027!
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This has been done, according to the Chancellor, because of Jeremy Hunt’s removal on the Lifetime Pension Allowance. Pensions will now form part of an estate.
Future generations are set to receive less from parents & families, it is imperative that tax planning becomes the norm for more people to ensure they retain wealth and pass on the very maximum they can.
Closing Thoughts
This was a Budget to meet the governments public sector pay & costs and looks like it does not have the ability to improve the quality/levels of service provided. You can already see tax rises coming down the road as soon as next year again. Maybe next time hidden in an Easter Egg!
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