Tax E-News – October 2024

Welcome to the October edition of Tax E-News. We hope that you find this informative. Please contact us if you wish to discuss any matters in more detail.

October 2024

POSSIBLE CAPITAL GAINS TAX CHANGES IN THE OCTOBER BUDGET

Many commentators are suggesting that the rate of CGT might be aligned with the rates of income tax, a return to the regime that applied when Gordon Brown was chancellor. Rachel Reeves is known to be a disciple of Gordon, so maybe we will see a return to taper relief as well! One would hope that Business Asset Disposal Relief (BADR), or something similar, is retained to encourage entrepreneurship and growth. She might even reintroduce Business Asset Taper, one of Gordon’s ideas, to reduce the effective CGT rate to 10% after 10 years’ ownership? If some form of CGT relief to encourage entrepreneurs is retained then maybe the conditions for obtaining the relief will be tightened still further? […]

SHOULD WE BRING FORWARD ASSET DISPOSALS BEFORE BUDGET DAY?

CGT changes normally take effect from 6 April, but there have been mid-year changes in the past. This possibility has caused many taxpayers to bring forward disposals to take advantage of the current rates. The disposal date for CGT is the date of unconditional exchange of contracts and there is likely to be anti-forestalling legislation to counteract attempts to artificially bring forward the disposal date. There is still time to sell listed investments before 30 October but other assets such as a business or property typically take a lot longer to sell unless a buyer is already lined up.

BEWARE “BED AND BREAKFAST” ANTI-AVOIDANCE

Many investors may be looking to realise capital gains on their investments at the current rates, just in case there is an increase with effect from 30 October 2024.  They may then wish to repurchase those investments after the change in rates to retain the balance of investments in their portfolio.  Where the same shares and securities are bought back within 30 days of the date of disposal, the shares bought back would be matched with those sold and the desired capital gain and increase in base cost may be negated. […]

RUMOURS OF PENSION CHANGES IN THE OCTOBER BUDGET

Changes to pension tax relief seems to be top of the list of possible changes in the Budget and could yield more tax revenues than changes to CGT and IHT combined. As recently as 6 April 2023, we saw the abolition of the lifetime allowance charge and a significant increase in the pension annual allowance to £60,000 a year, which Rachel Reeves commented were too generous, so we may see those changes reversed or curtailed. […]

MANY OVER 55s CAN WITHDRAW 25% OF THEIR PENSION FUND TAX-FREE

Under current pension rules, many pension funds allow pension scheme members to withdraw up to 25% of their pension savings tax-free. Finance Act 2023 limited the tax-free amount to £268,275 unless the individual had applied for protection at a higher amount. There are rumours that the tax-free amount may be further limited, with an amount of £100,000 suggested, and this has resulted in significant withdrawals from pension funds in recent weeks. It should be noted that there are anti-avoidance rules that limit the amount that can be reinvested in the pension fund within a 12 month period. […]

CHECK YOUR STATE PENSION ENTITLEMENT

The current State Pension is £11,502 and is due to rise to around £12,000 a year for 2025/26. At current annuity rates it would cost over £300,000 to receive an index-linked annuity starting at £12,000 a year, so it’s important to maximise your entitlement. […]

“NUDGE” LETTERS BEING SENT BY HMRC TO TAXPAYERS

HMRC have recently increased their use of “one to many” or “nudge” letters to taxpayers which suggest that there may be errors or omissions in tax returns or accounts information.  HMRC argue that these letters are a key tool in their compliance strategy but this is essentially a “fishing” expedition more akin to direct mailing and this may alarm many taxpayers who are completely innocent.  Please get in touch with us if you receive such a letter and we can deal with the matter on your behalf.

BEWARE “SCAM” LETTERS CLAIMING TO BE FROM HMRC

We have also become aware of scam letters and emails purporting to be from HMRC being sent to taxpayers. These letters request important personal information which would be needed by fraudsters to access your data. If you have doubts about whether a communication from HMRC is genuine, please contact us and we will check its authenticity.

DIARY OF MAIN TAX EVENTS

OCTOBER/ NOVEMBER 2024