With the next Budget set for 30 October 2024, we know many of you are feeling anxious about what this could mean for your finances.
With a new Labour Government and Chancellor Rachel Reeves taking charge, there’s a lot of speculation about significant tax changes coming our way.
The Prime Minister has already warned of a “painful” Budget, and experts are anticipating increases in taxes and the removal of key reliefs to fill the “black holes” in the nation’s finances.
Some changes have already been confirmed, so we know a few things for certain.
Furnished Holiday Lets
One significant change is the planned removal of tax reliefs for Furnished Holiday Lets (FHLs) starting April 2025.
If you own a holiday rental, this could mean the end of valuable tax perks like capital allowances and Business Asset Disposal Relief (BADR).
If you’ve been benefiting from these reliefs, it’s time to reassess your strategy.
Personal tax freeze
Labour has pledged to maintain the personal tax freeze established by the previous Government, meaning no alterations to Income Tax and National Insurance thresholds until 2028.
While this might seem like good news, it could pull more of your income into higher tax bands as wages rise with inflation – a way of increasing taxes without moving the thresholds.
Abolishing the non-dom status
The abolition of non-dom status is another thing Labour has chosen to follow through with from the previous Government but with their own amendments.
This change will have far-reaching implications for those using offshore trusts or non-dom status to mitigate Inheritance Tax (IHT).
Labour is set to scrap the transitional arrangements introduced by former Chancellor Jeremy Hunt, which were due to come into effect in 2025.
What could change?
In addition to what we already know to be certain, there’s plenty of speculation about what else could change.
A big concern for many is what could happen with Capital Gains Tax (CGT).
There’s talk of aligning CGT rates with Income Tax, which would hit investors and business owners hard.
If you’re thinking about selling assets or your business, it might be worth doing sooner rather than later, especially as there are rumours that BADR, which reduces CGT to 10 per cent for qualifying business owners, could also be scrapped.
Pension planning is another area that could see major changes. Labour could potentially reduce the annual allowances for pension contributions, limiting how much you can save tax-efficiently for retirement.
There are even some whispers that the current pension freedoms, allowing tax-free withdrawals of up to 25 per cent of your pot from age 55, could be on the chopping block too.
IHT is another area that might be under scrutiny. Labour could re-evaluate IHT thresholds and reliefs. Now might be the right time to review your estate planning strategies in preparation for any potential changes.
With so much uncertainty, it’s more important than ever to plan. We encourage you to get in touch with us to discuss your options and protect your wealth before any changes take effect.
Thank you
Pratima
On a lighter note, our India office recently celebrated their 10th anniversary with a well-deserved weekend spent in Udaipur- known as the White City of Rajasthan (because many of its buildings are made of white marble) and home of the famous Lake Palace Hotel – for fun, games, discussions and late nights!
