Isaacs Wealth & Benefits reposted this
The first Labour Budget in 14 years took place on the 30th October. A huge tax hiking Budget with employers facing the biggest bill, with the 1.2% increase in National Insurance (NI) moving from 13.8% to 15% and the lowering of the point at which an employer starts to pay NI to £5,000 from £9,100. From a planning perspective this makes salary sacrifice/exchange for pension contributions even more worthwhile in my view. We need to see some more of the detail and wait for the consultation in respect of unused pension pots becoming subject to Inheritance tax (IHT) from the 6th April 2027. In my opinion there needs to be some leeway with regards to death benefits post 75 where the pension would be subject to 40% IHT followed by income tax at the inheritor’s marginal rate which could be an effective tax rate of 67% by my calculations. Do you now consider drawing more income from your pension pot and spending the money to reduce the value of your estate or indeed gift monies to the next generation once you have drawn funds down. The fact that pensions will be under IHT in the future means that many people will now fall into IHT. There are still ways to mitigate IHT. Capital Gains tax (CGT) was another tax that was increased from 10% to 18% for basic rate tax payers and 20% to 24% for higher rate tax payers. The same levels currently paid on property transactions. A huge increase for basic rate tax payers. ISAS remain the place to shelter funds from CGT. The ISA allowance has been frozen at its current level of £20,000. This also makes investment bonds a more attractive place, both offshore and onshore. There were other changes with regards to Business Relief (BR). For estates arising from the death of an individual from 6 April 2026 onwards, there will be a new allowance/cap of £1 million that applies to the combined value of assets/property in an estate that qualifies for 100% BR or 100% Agricultural Property Relief (APR). Any assets/property in an estate over the £1m allowance that qualifies for BR or APR will only receive the relief at 50% - leading to an effective IHT rate of 20% for those assets. The £1 million allowance is not transferable between spouses on death. AIMs shares and other shares listed on similar exchanges will be subject to a flat 50% rate of BR reduced from 100%. These assets charged at the 50% rate do not use up the £1 million 100% BR/APR allowance. As a business we have utilised BR products to mitigate IHT and will continue to do so, it is important to make sure that your will is up to date so that any BR assets pass to the next generation rather than your spouse on death since the £1 million allowance is not transferable. We are now at the highest levels of taxation since 1948 and this will continue for at least the next 5 years whilst Labour are in power. We will do everything we can to assist our clients in mitigating tax wherever possible. If you have any questions then please get in touch.