June 2024 Newsletter | Cylchlythyr Misol Mehefin 2024
GENERAL ELECTION SPECIAL
Ahead of the UK general election on 4 July 2024, we look at some of the key personal tax considerations for the next Government:
- Income tax - no increase in tax rates (per Labour & Tory manifestos)
However, both parties will keep tax thresholds frozen until 2028, which will likely drag more low earners into paying tax and drag those on higher incomes into higher tax brackets.
- Pensions
There are many areas of focus within pensions that could be changed by the next Government:
i) State Pension: those in receipt of the State Pension are now paying tax on this pension, as the freezing of the personal allowance has led to the State Pension exceeding this tax-free allowance.
This is creating a significant amount of work at HMRC to collect this tax, therefore we may see a solution such as a new, higher personal allowance specifically for pensioners.
ii) Tax relief on pension contributions: currently, tax relief is given on pension contributions at your highest marginal rate of tax (40% or 45% if applicable). This could change post-election. If you are contemplating a pension lump sum contribution, you may wish to proceed before the election.
iii) Lifetime pensions allowance: the Government scrapped the lifetime pensions allowance (which stood at £1.073mn) from 6 April 2024 onwards and the Labour Party have confirmed in their manifesto that they will not seek to reintroduce the lifetime allowance.
Despite this, we believe that this area of legislation may be reviewed and revised by the next Government, therefore individuals with pension pots of over £1mn who are considering additional pension contributions may wish to complete this before the general election, in case the lifetime allowance is restored, or if a new type of allowance is introduced.
- Capital gains tax
- Capital gains tax rates have remained flat in recent years (except for the higher rate on residential property which was reduced from 28% to 24% from April 2024).
- Given that income tax, VAT and national insurance rates may not increase post-election, capital gains tax is an area where rates may be changed by a new Government.
- If you are in the process of selling an asset, you may wish to at least exchange sales contracts before the election, to avoid a potential increase in your tax liability post-election.
- Inheritance tax
- Very little commentary from the main political parties on Inheritance Tax legislation.
- Potential changes to inheritance tax reliefs, such as a reduction in Business Property Relief or Agricultural Property Relief. This may impact inheritance tax planning for families post-election.
We will continue to keep you updated on significant tax changes and Government announcements!
