Tax planning opportunities
We are now in interesting and uncertain times. We may know who is governing Britain and that the way ahead will be a compromise of coalition policies. What we do not have is any detail – we know the parties had different views and a compromise will have to be reached. As a start it appears that there will be no increase in the IHT limit and as a quid pro quo no mansion tax
The fact that some things announced in the 2009 Pre Budget and the (first) 2010 Budget have not hit the statute makes things more complicated. There is a lot happening and it is worth taking a look at your affairs in the round. .
We expect a Budget within the next 50 days and are confident that from then tax is going to change again.
In this post I specifically want to draw your attention to two areas: one where change is certain – Capital Gains Tax (CGT) and one where change is possible - pension contributions.
Capital Gains Tax (CGT)
CGT will change again and probably not for the better, particularly if you are paying tax at higher rates. CGT rates will be aligned with income tax rates on non-business assets (though this does rather beg the question as to what is a business asset). The end result is likely to be a higher tax regime generally but with, say, extended entrepreneurs’ relief.
Whatever the likely result now may be a good time to look at realising gains to take advantage of the current tax regime. It is important though to consider all angles such as an earlier tax payment, and when you expect a change of government and a consequent change in the tax regime all over again!
The current position on pensions is complicated - broadly if your income this year, last year or the year before was more than £130,000 you are probably in a regime where tax relief on personal contributions is restricted and potential tax liabilities arise on employer contributions. The Lib Dem manifesto proposed the removal of all higher rate relief on pension contributions. I have no idea when or if this would come in but if you planned on making contributions in the current tax year now may be a good time to do this.
If you would like to talk about the planning possibilities available to you or indeed the other tax issues expected in the next Budget please give us a call.
Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Cathy you can call her on 01908 605552.
Date: 14th May, 2010
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