Paraplanners believe the Chancellor will use the upcoming Budget to unveil changes to capital gains tax, inheritance tax and pension death benefits, according to a survey by Professional Paraplanner.
The vast majority (80%) of paraplanners expect changes to capital gains tax, noting that it would be the easiest area for the Chancellor to target.
With many other countries already aligning taxation of income and capital gains, paraplanners believe the government may look to implement a similar system in the UK.
“CGT is an obvious area, taxing profits and raising the rate of tax collected. The allowance is already low,” explained one paraplanner.
Another said: “Capital gains would be an easy target. with the allowance already at £3,000, reducing this further would be easy and have a minimal impact. They would need to look at an easier way to report the gains/ pay tax for those that do not submit self assessment tax returns.”
Meanwhile, just over half (51%) believe pension death benefits could be caught in the crosshairs as the government seeks to plug the £22 billion black hole in its finances. One paraplanner said they believe there the Chancellor could move to remove the distinction between pre and post-75 on death, with one taxable benefit for the beneficiary.
Another said the government could potentially place pensions inside the estate for inheritance tax purposes.
Indeed, IHT has been widely touted as an area the Chancellor could look to make changes to, particularly with the number of people liable to pay IHT increasing year-on-year, thanks to a combination of frozen thresholds and rising property prices. Half (50%) of those surveyed are expecting the Chancellor to make changes in next week’s Budget.
“IHT has been on the cards for a while,” said one. “The allowances go someway to helping the average joe but owning a property is now almost a guarantee that some IHT will need to be paid.”
Another echoed the sentiment: “IHT is an easy adjustment so they could fiddle with allowances as politically this is seen as a tax on the rich, although this is no longer the case with allowances frozen for decades.”
Just over a third (34%) are anticipating changes to the higher rate pensions tax relief, although a much smaller number (14%) believe the Chancellor will target the 25% tax free cash. Paraplanners pointed out that making changes to pensions tax-free cash could run the risk of reducing pension savings in the future and warned that it would be an unpopular choice, particularly while there are other “easier levers” for the Chancellor to pull.
One told Professional Paraplanner: “I think it would be foolhardy to reduce tax free cash given the recent introduction of the LSA/LSDBA and the unpopularity of reducing tax free cash, so I hope they don’t change it.”
Meanwhile a quarter of respondents believe changes to business relief are likely, with one paraplanner describing it as a “loophole” which may be ring fenced to prevent or limit pure investment incentives.
