The Autumn Budget may have been deferred, but the tax year clock is still ticking.
The deferral of the Autumn Budget, originally due on 6 November 2019, created several problems. It meant that the political parties went into the election with just a government sanctioned economic forecast produced back in March, alongside Mr Hammond’s Spring Statement. Plenty had changed in the intervening eight months.
At the time of writing, the next scheduled date for the Budget was unknown, although it is highly unlikely to happen before 2020. That means its arrival will probably coincide with the start of tax year end planning.
When it comes, as the first Budget following an election, it could potentially include some unwelcome measures. History (and the Institute for Fiscal Studies) show that Chancellors of all hues prefer to start off with the financial ‘medicine’ and save the sweeteners until nearer the next visit to the polls. It therefore makes sense to begin thinking about some tax year end planning before the (Winter) Budget arrives. Among the areas to consider are:
- Pension contributions The complex rules on tax relief for pension contributions forced the previous government into last-minute sticking plaster action to prevent NHS consultants refusing to work overtime. Whatever long-term solution is eventually found, it seems improbable that it will involve granting more tax relief. That might mean restricting relief to a flat rate, an idea that has been regularly floated. If you are a higher rate taxpayer, such a change would not be good news.
- Capital gains tax The relative tax treatment of capital gains and income has been highlighted by several parties during the election campaign. The current regime, with an annual exemption of £12,000 and a maximum tax rate of just 20% (other than for residential property and carried interest) is generous. If you have not yet used your 2019/20 annual exemption, doing so sooner rather than later seems a sensible course of action.
- ISAs A few years ago there was talk of capping ISA contributions. With ISAs now costing over £3bn in lost income tax according to the latest HMRC figures, such Treasury brainstorming could reappear. Again, if you have not topped up your 2019/20 contributions, now is the time to act.
For more details on these or any other tax year end actions, please talk to us as soon as possible… and definitely before that next Budget.