January is almost over so it’s time to look forward to the Budget, due to be delivered on 3rd March.
The Chancellor must find a balance between supporting the health of businesses and the consumers they rely on.
It is unlikely the Chancellor would want to risk pushing the economy too hard into reverse by introducing aggressive tax-raising measures too soon. In any case he probably doesn’t need to because the Government borrowing is not like an individual’s personal loan or credit card. The UK Government is not going to go bust and so represents a safe option for investors whom the Chancellor will want to encourage to invest in long-term debt which is known to be secure.
That doesn’t mean there won’t be tax raising measures but a lot of those are unlikely to be rushed in from 6 April but rather take effect over a longer term. This is especially true of the much rumoured talk of reforms to Capital Gains Tax (CGT) and Inheritance Tax (IHT), though rate changes cannot be ruled out and at present the only certainty is that tax rates won’t be going down in a hurry.
CGT and IHT being capital taxes they affect long-term growth and require long-term planning and we can expect to see outline announcements and consultations on changes flowing from recommendations made by the Office for Tax Simplification (OTS). But if recent history tells us anything it is that rushed legislation is usually bad legislation; if not in its underlying principles, then certainly in the details of its application. In capital taxes this is especially the case because CGT and IHT interact so much.
That does not remove the need for long-term capital tax planning because any future changes may have consequences for actions taken now. A trust created now might provide benefits by removing assets from an estate while useful reliefs like IHT business property relief and agricultural property relief apply on their present generous terms.
So, whilst it is rarely a bad time to start thinking about estate planning there is more urgency than ever to make sure that all planning options are considered.
The one thing that does seem likely is that this year’s budget may not be interesting, but it is in your interests to plan ahead. Please contact us for more information on how our specialist tax team can help.