Labour may increase taxes later this year (Image: GETTY)
A tax advisor has urged taxpayers to get their affairs in order ahead of a key Autumn date. Stuart Ritchie, of Ritchie Phillips, said there are several tax increases Labour could be looking at that people should prepare for.
He warned: “The obvious step individual taxpayers should consider is undertaking any tax planning they were contemplating in any event ahead of the Autumn Statement on October 30.
“Depending on your stage in life, examples are topping up your pension scheme to secure income tax relief or taking the lump sum of your pension scheme to secure the tax free amount.”
He said that as Labour have pledged not to increase income tax, National Insurance or VAT, they will likely go after taxes that apply in “very specific circumstances” and there may be changes to pensions policy.
He explained: “It is likely the Labour government will attack pensions in two ways. Presently tax relief on pension contributions is given at the taxpayers’ marginal rate of tax, be that 20 percent, 40 percent or 45 percent.
“Tax relief could be limited to a lower percentage, such as 30 percent, which would be the same as for tax relief on investments into Venture Capital Trusts.
“There is also the angst the Labour government has over the former lifetime allowance for pensions, the amount you can accumulate within your pension scheme.
Labour may increase taxes later this year (Image: GETTY)
“The changes introduced by the former government abolished the lifetime allowance in all respects other than to limit the tax free amount on retirement to usually 25 percent of the former lifetime allowance of £1,073,100, namely £268,275 if your pension fund exceeds the amount of £1,073,100.
“One possibility would be to reduce the tax free amount to an absolute amount of say £125,000 meaning that any amounts in excess of this would be subject to income tax at your marginal rate of most likely 40 percent or 45 percent.”
Mr Ritchie said those liable for inheritance tax would also do well to act now ahead of any changes in the Autumn Statement.
Labour may increase taxes later this year (Image: GETTY)
He commented: “In terms of inheritance tax, to the extent you have excess assets you wish to gift to others, notably your children or grandchildren, making that gift before the Autumn Statement is a sensible step as there is no inheritance tax on lifetime gifts to individuals provided the donor survives seven years from the date of gift.
“If there were to be changes to the 100 percent reliefs from Inheritance Tax for business and agricultural property, lifetime giving would be a good way of securing these reliefs in anticipation of any adverse changes, again assuming the donor survives the required seven years.”
Nick Evans, founder director at Taylor Evans Accountancy, also encouraged Britons to act now ahead of any changes announced by the Chancellor.
He explained: “Individuals should consider reviewing their investment strategies and possibly realising gains within the current tax year to take advantage of existing allowances.
“Given the likely focus on inheritance tax, now is an opportune time to review estate plans, utilising available allowances and exploring trusts or gifting strategies.
“Maximising pension contributions under the current rules could also provide significant tax benefits before any potential changes are introduced.
“Most importantly, seeking professional advice from a tax advisor or accountant can help individuals navigate these changes and optimise their tax planning strategies.
“In these uncertain times, proactive financial planning is essential to managing future tax liabilities effectively.”
