Spring Budget 2023
Such considerations and discussions with advisers around personal tax and estate planning are all the more important in view of any potential changes to the tax regime announced by Jeremy Hunt in his upcoming Spring Budget on 15 March 2023.
With the Government focused on ways to grow the economy faster, and bring debt and inflation down, tax increases (or removals/tweaks to the various exemptions and reliefs), rather than tax cuts, seem more likely to be the order of the day.
We already know (from the Autumn Budget 2022) that the annual exemption for capital gains tax (CGT) is due to be halved for individuals from its current level of £12,300 to £6,000 from 6 April 2023 (and again to £3,000 from 6 April 2024). Investors and business owners may therefore want to consider crystallising gains now to make the most of the more generous tax-free allowance. This is all the more so given the murmurs in recent years of a potential increase in the headline rate of CGT (at a historic low of 20%) to align it with the rate of income tax (i.e. 40% or 45%).
Earlier on this week, it was revealed that the Treasury’s tax receipts for CGT and IHT have increased by 24% and 15% respectively on the previous year.
The 15% increase in IHT receipts is most likely a result of the nil-rate band (the level at which no IHT is paid) of £325,000 (for an individual and £650,000 as a married couple) remaining the same since 2009, meaning the value of more estates becoming liable to pay IHT, when one takes account of inflation and the rise in house prices.
This nil-rate band is set to be frozen until 2027-28 (again, announced by Jeremy Hunt in Autumn 2022), and with that in mind, one would be wise to take steps now to consider setting up a trust, making full use of the gift allowances, which allow you to pass on money to family while reducing the value of your estate, and leaving a legacy to charity, as ways of reducing any potential inheritance tax bill, especially in the event that such allowances/reliefs become vulnerable to amendment/removal in the future, either at the Spring Budget next month (or in the near future).
In short, it would be prudent to plan now and seek to arrange any steps to lock-in the key benefits referred to above before it is too late. Please do let us know if you would like to discuss anything raised in this article.
