Taxpayers have been urged to act now as Chancellor Rachel Reeves could soon announce a “substantial” tax hike hitting thousands of people.
Experts have warned the Labour Government could increase capital gains tax from the current 24 percent and 28 percent, to bring it in line with income tax rates.
Neil Rayner, Head of Advice at wealth firm True Potential, said: “The most compelling option for Labour is to bring capital gains tax in line with income tax.
“This would mean a substantial rise from the current thresholds of 24 percent and 28 percent depending on your marginal rate of tax.”
The basic rate of income tax is currently 20 percent but this increases to 40 percent for the higher rate and then to 45 percent for the additional rate.
Mr Rayner pointed to a key tax-free allowance people could use to avoid being hit by the levy going up.
He said: “One way to minimise the impact of these changes is to ensure that you make the most of your £20,000 ISA allowance as money invested through these accounts is exempt from capital gains tax.
“There are no current plans to scrap the British ISA plan which could mean an additional £5,000 allowance will be available in the near future.”
Andrew Parkes, National Technical Director at tax advisory group Andersen, who spent almost 30 years working at HMRC, also thinks Labour will see capital gains tax as a relatively risk-free way to increase Government incomes.
He said: “There has been so much talk about capital gains tax and inheritance tax rising that it is an almost certain self-fulfilling prophecy and costing Labour no political capital.”
Mr Rayner said Labour have a couple of options for increasing inheritance tax.
He explained: “They can either introduce a new higher band of income tax for those with a large estate or they can choose to lower the nil-band rate which currently means £325,000 can be passed on to descendants tax-free.
“Rachel Reeves could also issue a clampdown on IHT avoidance. Those who are concerned about changes to inheritance should seek professional advice and draft a formal will.
“This can help identify ways to reduce the tax burden and ensure an efficient transfer of wealth. For those with large estates, setting up a trust can offer longer-term protection.”
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