Rishi Sunak will stand and present his second budget for 2021 on 27 October. This short update summarises some of the speculated changes to tax and other matters that he might be considering, and if appropriate, action you could take before budget day to pre-empt these possible changes.
Planning notes: do not take any action based on the planning notes added to this update without contacting us so we can consider your options based on your individual circumstances.
Inflation – hang on to any surplus cashflow
Inflation is predicted to rise to 4% this year and if supply issues continue into 2022, this level of inflation is unlikely to fall. At some point, the Bank of England may have to consider interest rate increases.
Planning Note: If you have loans – say a government-backed Bounce-Back loan – where interest charged is fixed at low rates (Bounce-Back loans are fixed at 2.5%), you may be wise to resist any temptation to pay off these loans from present surplus cash-flow as further disruption to activity and interest rate hikes are both possible.
Capital Gains Tax change
There is a possibility that capital gains tax rates will be increased by aligning them with income tax rates.
Planning note: If you are considering the disposal of an asset that will create a CGT liability, you might be advised to complete the sale before budget day, 27th October. Very few tax changes apply from budget day but disposals after the 27th may attract a higher tax charge.
Contributions into pension funds
There has been speculation for some time that tax relief for higher rate income taxpayers will be either scrapped or reduced based on payments into qualifying pension funds. With pressure on to reduce borrowings the Chancellor may be tempted to act on this issue.
Planning note: Have a conversation with your pensions adviser before budget day and consider bring forward contributions to secure existing higher rate tax relief.
Keep an eye open for our Budget Impact Statement and our full Budget Summary that we will be distributing on or shortly after the 27th.
Please call us if you would like to discuss any of the above issues. And please, don’t take any action without calling us in the first instance. This update can only provide you with generalised comments, we need to discuss any actions you may make before budget day based on your individual circumstances.