This document has been prepared based on rumours and speculation around the new Labour Government’s budget which is taking place on 30th October 2024.
This document is based on opinion and speculation and should not be used in place of seeking professional tax advice. This document does not purport to address all possible worldwide tax consequences that may be relevant.
We accept no liability (including for negligence) to anyone else or for any other purpose in connection with this document and recommend that professional tax advice is taken.
Budget Rumours
The Labour government has pledged not to increase certain taxes, such as Income Tax, National Insurance, and Corporation Tax. However, they have not made any promises regarding other taxes in several areas. The Labour government’s budget is set to be announced on October 30th, 2024. In this article, we’ll examine the key rumours surrounding the budget and explore strategies that can be implemented ahead of time to help minimize the potential impact on your clients.
Rumour 1 – Raising Capital Gains Tax
The Rumour
We believe that Capital Gains Taxes will almost certainly increase in Labour’s October budget. While Kier Starmer has ruled out charging Capital Gains Tax on an individuals primary residence, he has not made any promises regarding other area of Capital Gains Tax.
The government could make changes either by further reducing the Annual Exempt Amount (currently £3,000) or by increasing the rate of tax – with some sources predicting an increase to the rates to bring them in line with income tax rates.
Should the Labour Government decrease the Annual Exempt Amount (AEA), this would bring a larger number of individuals within the scope of Self-Assessment or increase the numbers of Real-Time Capital Gains Tax returns. With this in mind, we believe that it is more likely that the rate of Capital Gains Tax will be increased rather than any further reduction in the allowances.
It is likely that any changes to Capital Gains Tax rates will take hold from 6th April 2025 however anti-forestalling provisions may be implemented to prevent individuals from entering into arrangements to secure disposals at the currently lower tax rates.
How to Mitigate This
Prior to the budget we would recommend bringing forward any proposed disposals in order the ensure that these take place under the current, lower CGT rates and allowances rather than the likely higher rates which may be in place post the budget.
Transaction such as passing a business from parents to children could be brought forward in order to ensure that these transactions are not negatively impacted by the budget.
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