📅 This year’s Budget is on 3 March.
⛪ Easter is quite early this year, just over four weeks after the Budget. The last working day of the tax year is (ironically) 1st April.
😨 Tax changes are always rumoured before a Budget. Most of the time they never happen, but this year could be different.
🇬🇧 The Government has borrowed huge amounts of money to support the economy during the coronavirus pandemic… The Government can afford this in the short term, but sooner or later taxes simply have to increase to fill that gap 💣.
💷 Tax year-end planning could be vital this year. Seismic changes might not have enough time to come into effect on 6 April, but they could well be announced and on the statute books for the following year, and the direction of travel made clear.
🤔 My overriding thought:
💡 You need to maximise your existing tax advantages and tax allowances. All of them could be less generous in the future.
👍 I will elaborate on the following in more blog posts in the coming weeks but here are a few ‘Starters for 🔟’:
📈 Capital gains tax is strongly rumoured for reform. Wherever possible, make sure investments are held in a Stocks & Shares ISA. They’re tax-free and ISAs avoid incurring income tax and capital gains tax, both of which could easily be higher in the future.
🏭 Business owners: pay yourself tax efficiently; a small salary and dividends thereafter. Despite the tax on dividends increasing a few years ago, this is still the most tax-efficient option. Make sure your spouse also has some shares so they can be paid dividends too.
♾️ If you contribute to a pension, pay in as much as you can afford because I think the generous tax breaks for doing so will not be as good in the future.
🎇 If you don’t contribute to a pension, do so. They are the most tax advantageous investment available.
🚀 Start a pension for your children and/or grandchildren. Compound interest over decades will work wonders for them.
💸 If you have already maximised your ISA and pension allowances, consider VCTs (Venture Capital Trusts) or EISs (Enterprise Investment Schemes). Investing in them brings 30% income tax relief but beware, the words ‘venture’ and ‘enterprise’ means they are high risk.
🏠 If you are a property investor, claim your allowances, offset your expenses and keep loan interest costs down – with interest rates so low, mortgages are cheap as chips these days. Perhaps pay off more capital each month with the resulting surplus cash flow and/or pay it into a pension instead.
⚱️ IHT planning: at short notice, you can use the £3,000 annual gift allowance or gift larger amounts and start the 7-year clock. Any other actions, such as setting up trusts or regular gifting from surplus income, will take time and will need to be carefully considered in the context of your wider financial planning.
More details on the above coming soon…