Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
How to protect your wealth before the Budget
Jasmine Birtles
18th Oct 2024
This year’s nervously-awaited Budget will be on Wednesday October 30th. It will be Chancellor Rachel Reeves’s first ever Budget and the first Labour Budget since the final days of the Brown government in 2010.
What will be in the Budget?
There have been all sorts of rumours and suggestions but, of course, none of us really knows unless we havre a hotline to Reeves. At this stage, frankly, I suspect that even she doesn’t fully know what will be in the detailed ‘Red Book’ that is went out as the speech is given.
Given the dire predictions of some commentators, is there anything you can do to protect your wealth?
I’ve asked a few professionals for ideas and here are my thoughts, with their comments, that might help you decide what, if anything, you should do to protect your assets from Westminster’s Raiders of the Lost Tax!
Capital Gains Tax (CGT)
Right now, for most people, if you sell an asset for a profit – like a painting or a car for example – you can keep the first £3,000 of profit for free, but anything above that is taxed at 10% or 20% for higher rate taxpayers.
If you sell a second home (not the one you live in which doesn’t incur tax if you make a profit) the tax rate is 18%, unless you are a higher rate tax-payer when it is 24%.
If you sell a business you can keep the first £12,500 tax-free but after that you incur a 10% CGT payment for ordinary tax-payers or 20% for higher-rate taxpayers.
There are other ways in which CGT can be incurred but the above are the most common areas where ordinary citizens could find themselves paying this tax.
What are the proposals?
There are all sorts of rumours flying around about what Rachel Reeves will announce in the Budget on 30th October, but the loudest of them are predicting that CGT will rise to between 30-39% depending on the asset being sold. This is what is driving rich people away from the country already and it particularly worrying entrepreneurs who are building up their business to sell.
What can you do?
No one really knows if Reeves will put CGT up to 39% or even higher, but those who were thinking of selling their property a while back have put their skates on! Many others have sold some shares and other assets that they were already thinking of ditching…just in case.
Mark Routen, Head of Tax at Hoxton Wealth, says “”If you are considering selling an asset, to put in simply, you should look to do it before the budget.
“”You do not have to complete the sale but get to the binding contract stage and this is the date that triggers the tax. You could also look to rebase the cost of any asset by selling and having your spouse purchase back or moving it into an ISA or corporate structure such as a family investment company. This could trigger an immediate charge but offer a potential saving of up to 25 per cent long term.”
Basically, if you were going to do it, then do it, but if you didn’t have plans before then you’re probably better off waiting until the Budget before you make a move. You don’t want to do anything too quickly.
How to cut down on CGT liabilities
Happily there are a few investments that don’t attract CGT. So, if you’re looking to invest now, consider something of the below ideas.
- Gold sovereigns – it’s rather handy to know that if you buy gold sovereigns you don’t have to pay VAT on them and when you sell them you won’t have to pay CGT on the profit. This is becuase sovereigns (not gold bars) are considered legal tender in this country
- Whisky – Aaron Damiano Sparkes, Founder and CEO of whisky cask investment company Whisky 1901says”HMRC classes it as a ‘wasting chattel’ – an asset that typically has a lifespan of 50 years or less….f an investor keeps their whisky in its cask for the entirety of their investment journey, they are not liable to pay any CGT on the cask even after it has been sold, resulting in tax-free profit.”
- Commercial property – Robert Schogger, joint chief executive and co-founder o, MetSpace says that people with residential property should consider moving to commercial property. However, as more companies enable employees to work from home and retail outlets find it hard to compete against online businesses, commercial property still looks quite vulnerable to economic shocks.
Pensions
Mark Routen, Head of Tax at Hoxton Wealth says “There are expected to be big changes made to pensions and this could take shape in the tax-free lump sum, tax relief on contributions and exposure of the funds to inheritance tax.
“The message at this time is if you are considering a contribution make it before the budget and if you are looking to take your tax fee lump sum also do this before the budget.”
Inheritance Tax (IHT)
We’ve been hearing for years that the government would put up inheritance tax (IHT) but so far it hasn’t happened. With Labour it’s more likely.
Yiannis Zourmpanos is a consumer trends analyst at Bountii, suggests “Inheritance tax (IHT) is another area likely to come under Labour’s microscope. If you’re concerned about leaving a financial legacy, one option to explore is gifting assets during your lifetime. In the UK, some rules allow for tax-free gifts, provided you live for seven years after the transfer. While no one likes to think about their mortality, planning these transfers early can save your heirs from a hefty tax bill later.”
Is it worth doing anything at all?
There are so many rumours and counter-rumours going around about what the Chancellor will announce – some of them put about by the government itself! – that it’s hard to know what to believe and what to ignore.
The Labour government under Tony Blair started the practice of leaking ideas they had for new policies through the media before they did them. If they found the people’s response was very negative they then backed off that idea. It could be happening now with the Budget ‘predictions’. The worse the response to the ideas the less likely they are to happen…perhaps.
However, with the debt burden this government has inherited from the last one together with the extra spending plans Labour has going forward, Reeves has to get some money from somewhere, particularly as thousands of very rich people have already left the country, taking their high tax payments with them, so we can all definitely expect extra taxes to fall on our shoulders somehow. We just don’t know exactly what right now.
On 30th October I will be on various media outlets discussing the Budget and I will definitely give my take on my TikTok platform so come and follow me there to get real-time analysis and my sideways look! I’m @ JasmineBirtles.
printing money and then taxing the profit is just theft