Sharing his reaction to today’s budget statement, Jason Hollands, Managing Director at Evelyn Partners, the wealth manager which looks after c£63 billion of assets, comments:
“After months of speculation about tax raising measures, Rachel Reeve’s Budget announced £40 billion of tax increases today, higher than anticipated. In large part this was due to a more aggressive approach to increases in employers National Insurance, in particular the sharp reduction in the earnings threshold at which the tax kicks in from £9,100 to £5,000 from April 2025 as well as an increased in the rate to 15%. Other tax hiking moves include making DC pension assets part of estates for Inheritance tax purposes from April 2027 and a narrowing access to Business Relief and Agricultural Relief which help mitigate IHT.
“In some quarters though, there will be a relative sigh of relief. Thankfully, there was no cut or lifetime cap imposed on ISAs – which some think tanks had called for. Nor was there a reduction in the amount of tax-free cash that can be taken from pensions, the thought of which had given many people sleepless nights. Savers who had pulled their tax-free cash out of their pensions prematurely in recent weeks may be able to urgently revisit their decision depending on what ‘cooling-off’ periods their pension providers have in place – this is often 30 days.
“Expectations of a hike in CGT were well trailed ahead of the Budget and so today’s confirmation that the main rate of CGT will rise from 20% to 24% for higher and additional rate taxpayers, and from 10% to 18% for basic rate taxpayers are hardly a jack-in-the-box surprise.
“What is a surprise, is that the new rates apply from today. A mid-year tax rise is highly unusual and while there is precedent from former Tory Chancellor George Osborne’s June 2010 Budget, this saw the increases applied from midnight rather than the day itself. This means that anyone who sold shares this morning, hoping to avoid a hike, will probably be hit by the higher rates.
“If there is a relative silver lining in today’s CGT rise, it is that the worst-case scenario, of aligning CGT rates with those for Income tax which some had called for, has thankfully not come to fruition and the increase is at the lower end of expectations for higher rate taxpayers – though more dramatic for those on the basic rate of tax. A more punitive level of CGT would have undermined the Government’s rhetoric about being pro-investment.
“Nevertheless, higher CGT rates combined with the steep cuts to the annual exemptions in recent years together make for a less investment friendly tax-environment and should focus minds firstly on the importance of utilizing tax wrappers like ISAs and pensions, which protect investments from tax on both capital gains and dividends, and secondly on the use of annual tax-exempt allowances. This is especially important if you are married or in a civil partnership and can take advantage of both sets of allowances, and transfer savings and investments so they do not attract unnecessary tax liabilities.’
