WITH so much focus on tax in the past few months, it would be no surprise if this week’s Autumn Statement sets taxpayers up for a long and cold winter. Its contents are as yet unknown, and George Osborne has vowed to keep his silence ahead of Wednesday’s Statement. That, however, should not prevent taxpayers from preparation and planning. Any change that the Chancellor may announce could take effect immediately, making it worthwhile to take action before Wednesday.
1 PENSION CONTRIBUTIONS
One issue that stubbornly refuses to depart is that of pension contributions. Speculation is still mounting that the annual allowance may be reduced to £40,000 or £30,000. There are further suggestions that relief at the top rate might be cut to 40 per cent or even basic rate. Anybody wishing to maximise their contributions should do so now. With the current limit at £50,000, this means that you would pay £40,000, bumped up by basic rate tax to the £50,000 limit, leading to a further tax rebate of £10,000 if you are a 40 per cent taxpayer, or £15,000 if you are a 50 per cent taxpayer.
Stamp Duty Land Tax (SDLT) has continued to rear its head since the changes made in Budget 2012. Changes in the pipeline could include increased rates or reduced thresholds. Again, we would advise anybody that has an imminent property transaction to push hard to exchange contracts ahead of Wednesday. For first time buyers, another SDLT holiday has been mooted. People in this situation may conversely wish to wait until after Wednesday before exchanging the contract.
3 GIFT AID
Proposals to limit the amount of tax relief available when donating to charity were quashed in a memorable U-turn earlier this year. But if the mooted thoughts on pension tax relief are anything to go by, a restriction on the rate of relief could conceivably now be in the Chancellor’s sights. If you are planning to make a donation to a cherished cause this tax year, now is the time to do it.
4 INHERITANCE TAX
Inheritance tax is another issue that has been in and out of the coalition’s considerations. Any planning should be done as soon as possible, as any changes that the Chancellor makes are not going to make the system any more generous.
The Enterprise Investment Scheme has opened up exciting opportunities for people across the country. As this tax year’s relief (at £1m) is at twice the level it was at last year, the Chancellor might feel that he is being overly generous in light of the way the economy has been going recently. Those considering making investments should do so sooner rather than later.
6 INDIVIDUAL SAVINGS ACCOUNTS (ISAS)
Isas are a universal tax planning tool that really can be restricted at the drop of a hat. The coalition has made it clear that it will look to boost Treasury coffers as much as possible and this could be a simple way to do just that. If you have not done so already, use your annual allowance this side of Wednesday.
7 CAPITAL GAINS TAX
There is some speculation that the main rate (28 per cent) of capital gains tax might be increased. To avoid any negative changes this week, any transactions that are in progress should be concluded today or tomorrow. For tax purposes, this means an exchange of unconditional contracts.
8 CHRISTMAS CRACKER
Whether there will be changes to VAT is a difficult one to predict. On the one hand, if you’re buying gifts, there may be no time like the present as a VAT increase can never be ruled out. In which case you should finish your Christmas shopping early this year. Then again, a cut in VAT could boost consumer spending, possibly a good option for Osborne, so it might be better to leave the Christmas shopping to the last minute.
9 NI HOLIDAY
There is talk of a National Insurance holiday for employing young people. If you are running a business and looking to hire a young person, you might want to wait until after Wednesday, just in case.
10 GENERAL ANTI-ABUSE RULE (GAAR)
There is a definite possibility that we might hear a little more from Osborne on GAAR this week. It is a tricky piece of legislation, as catching abusive or aggressive acts of tax avoidance by individuals will first require defining them, which is no easy task. The wording used is crucial as one pen stroke here or there could be the difference between a flexible and effective tool against tax dodgers, and a draconian clampdown on almost any form of tax planning. There is no real way to prepare for this other than to ensure your tax affairs are in order.
The Autumn Statement has usually been devoted mostly to macro-economic matters, but personal tax is an issue that the coalition has started to take an interest in. Other possibilities for Wednesday’s announcement include a further announcement on the statutory residence test, and another look at a mansion tax. Until then, taxpayers are advised to act quickly.
Tim Gregory is partner in the private wealth group at Saffery Champness.