Today sees the General Election and we think whichever party forms the government an emergency budget will be scheduled for late June or early July. To this end, what actions should individuals be taking soonest, and ideally before any budget?
Looking first at the mainstream planning, we consider how pensions could be affected, particularly for higher earners, but also more niche planning may be considered for other individuals.
Both political parties have offered proposals to reduce pension savings tax relief in their manifestos.
Labour have proposed to limit tax relief for those earning over £150,000 to 20% and to reduce the annual allowance for all pension savers to £30,000.
The Conservatives have proposed to reduce the annual allowance to as low as £10,000 for those earning above £150,000 in a tapered way.
It is unclear how these proposals will work, and the complications involved will no doubt be significant. Fully funded pensions can be very tax efficient and therefore if you are thinking about pension contributions you may consider bringing them forward to use the current level of tax relief.
Labour have said that they will increase the top rate of income tax from 45% to 50%. This means an increase in tax for higher earners and we can see increased bonuses and dividends in the 2015/16 to receive these payments before the higher rate of tax hits.
Labour have also pledged to freeze some taxes if it gains Office but has not mentioned capital gains tax so it may be advantageous to sell businesses, properties or other assets before 5th April 2016 to avoid the increase in capital gains tax which for many individuals is currently 28%.
Due to the risk of a coalition Government the manifestos may significantly change from law that is enacted. Nevertheless given the ability to either increase tax relief or reduce tax paid in the current tax year, particularly before any emergency budget (in case “anti-forestalling” applies) action may need to be taken now and we would be happy to discuss this with you.