What could budget day have in store for investors?

This week we’re in conversation with Relationship Partner, Jonathan Elsigood, about tomorrow’s Spring budget announcement from the chancellor, Rishi Sunak…

Jonathan, what announcements could be coming for investors?

The main thing will be if they decide to raise Capital Gains Tax (CGT).

If I was the chancellor, I’d be thinking about giving us a period of time to get used to the idea of an increase – it’s a favourite revenue tactic to give taxpayers a bit of time to get their affairs in order. I would be signalling a change for April 2022 to give people 12 months to look at their assets, sell a second property, things like that.

In the case of CGT, the government can’t force you to sell an asset – it’s voluntary! A time delay would bring tax into the coffers of the revenue, whereas bringing in an overnight increase will just mean people defer, defer and defer.

Do you think there’s any other changes coming?

I don’t think they’ll be any change to ISAs, keeping the limit at £20k and probably no major changes to the pensions annual allowance either.

It’s a way of them keeping the lid on the pensions tax relief – bearing in mind they’ve tried to make changes before and it’s quite a big job and not something they can easily do overnight! The easy thing to do is just to keep the allowances the same.

It’s got to be on the chancellor’s mind that the government needs to stimulate economic growth and make sure there’s recovery as quick as possible to try and get us over the shock of the pandemic – easy things for him to do will be to keep the personal allowance and tax bands at current levels but not increase in line with inflation. It’s what’s called fiscal drag and it’s an easy revenue raiser for the chancellor!

But also bear in mind the Treasury has announced a ‘tax day’ on 23^rd March, when various tax consultation documents will be published. So, we may be left waiting until then to find out more on the chancellor’s plans.

Change can be unsettling, so what should investors do?

1. Don’t panic – CGT is voluntary and it’s down to the individual. Even if Rishi reduces the CGT annual exemption say from 6^th April, it’s simply a case of use it or lose it!

2. Assess the gains in your portfolio and think about it in terms of your future cashflow needs in the shorter to medium term. It all comes down to your personal plans and understanding how this all fits together. If there are asset sales you’ve been kicking down the road maybe a CGT announcement will jolt you into action.

3. If you’re older it’s worth remembering you can get an uplift of capital gains on death. So, maybe you don’t do anything rather than triggering the tax by selling now and then inheritance tax on death.

It all comes down to personal circumstances and making decisions in line with your plans.

The tax year end is looming, what should be on the radar of investors?

Get the basics right. Make sure all of your tax allowances are used, utilise your ISA allowance and pension contributions. Tax year end planning isn’t about clever stuff, it’s about making sure all your allowances are used – organise the basics and you’re 85% there!

So, there it is! Jonathan’s thoughts and tips on what tomorrow could have in store.

We’ll be in touch on Thursday will a full round up of the announcements but if you have any questions or concerns get in touch with your usual CPW team member or book a no obligation call by clicking here.

This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action.