This Month: Octobers Budget: Estate Planning With A Smile: Stir it Up.
This Month's Budget
Chancellor Rachel Reeves is set to deliver her first Budget on October 30. Both chancellor Reeves and prime minister Keir Starmer have warned that difficult decisions have to be made, with the prime minister referencing the Budget as painful. With the country facing a supposedly £22 billion black hole, chancellor Reeves implemented some immediate cuts.
What Has Already Been Announced
Cuts include cancelling the Stonehenge tunnel infrastructure project, swapping the winter fuel payments to a means-tested system, and scrapping the NatWest retail share sale stating that it would not represent value for money.
Labour has confirmed that private school fees will be subject to VAT starting on January 1, 2025. This will increase tuition costs by up to 20%.
State pensions to continue to rise each April in line with inflation, or by 2.5%, whichever is higher. Although pensions are expected to rise, with the current frozen income tax bands, pensioners could face tax on their retirement income.
What Could Be Announced
Labour continues to reaffirm that it will not increase taxes for working people. The prime minister has also stressed that income tax, National Insurance, and VAT would not be increased. This isn’t to state that your pocket won’t feel the Budget changes. Below is a list of what could be announced:
Capital Gains Tax (CGT) - An increase in CGT, bringing the tax payable in line with your income tax rate. The current CGT rate system is complicated with rates of 10%, 18%, 20% and 24% depending on what is being sold and the level of other income received in the tax year of disposal.
Inheritance Tax (IHT) - Cuts to the tax-free allowance for inheritance, in particular, the Residential Nil Rate Band (RNRB), and simultaneously increasing the IHT rate. The RNRB level is currently £175,000 per person, so a couple who are passing their home down to direct decedents, stand to lose up to £350,000 in IHT allowances. There is talk of IHT itself to be increased from 40% to 45%.
Private Pensions - Removing the tax-free status on pension lump sums. Currently you are entitled to take a 25% lump sum from your pension pot, free of any taxes. Charging inheritance tax on pensions is another option. Currently, pensions are not considered part of your Estate when you pass away, meaning IHT is not due.
ISAs - Income from interest and dividends on cash and shares in ISAs is exempt from income tax and capital gains tax. The government could cap the amount invested in an ISA on which exempt income can be received. They could cap relief to the first £50,000 held within an ISA.
Council Tax Increases - Local authorities could be given the green light to raise council taxes further or to introduce extra bands for those with larger homes.
Freedom To Buy Scheme - The Freedom to Buy scheme is still on, as Labour has pledged to make the current mortgage guarantee scheme permanent.
Non Dom Status - Tax loopholes are expected to be closed and the redefining of the guidelines for taxing foreign income for new arrivals to the UK to be implemented.
Air Passenger Duty (APD) - A nominal increase in APD for domestic flights. As it stands, the lowest APD rate for domestic flights is £7 per flight. Illustrative figures suggest that for every £1 increase in APD it would raise an additional £130m.
Gambling - Introducing a tax on gambling winnings could bring in revenue from the booming betting industry. Currently, gambling winnings are tax exempt.
VAT - Reducing the VAT threshold, currently £90,000, would mean more small businesses need to charge VAT, passing the burden to consumers.
Ms Reeves will present the Government’s first Budget to Parliament on October 30th 2024. Traditionally, the Chancellor will begin speaking at around 12.30pm, after Prime Minister’s Questions.
We at Phoenix Estate Planning say, rather than the doom & gloom that the government keeps going on about, let's have some good news from the budget. A budget that encourages investment and helps the economy to grow.
After all Chancellor, fortune favours the brave.
Estate Planning With A Smile
Estate Planning doesn't have to be about doom and gloom. It's about passing down your stories and memories after you've caught the express train to the great beyond. So, take a moment to ponder your Legacy, share some laughs, and let's create a Plan that'll make your future self and your future generations proud.
✅ Protect, Plan and Pass On...
Let's talk - give us a call to discuss further.
Stir It Up
Bob Marley sadly died in 1981 aged just 36, without a Will in place. Under Jamaican law his Estate (worth $30 million at the time) should have passed to his wife and children. However, following his death, several people tried to make a claim on Marley’s Estate which meant his wife, Rita, spent 10 years fighting for full control of the Estate. This process cost her millions in legal fees.
Eventually the Estate was settled under Jamaican intestate laws. Marley’s wife, Rita, received 55% of his Estate, and his 11 children were entitled to equal shares in the remaining 45% of the Estate.
Bob Marley’s lack of Will was believed to be due to his personal beliefs. Had he written a Will, Trust, or other Planning documents, it is less likely that his Estate would have been open to decades of disputes and legal proceedings.
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