In the wake of Chancellor Jeremy Hunt's Spring Budget announcement yesterday, the financial landscape in the United Kingdom was for many materially unchanged. There were implications for some sectors including property and inheritance tax. While the Budget brought some changes, Qubic clients can breathe a sigh of relief as their tax planning remains unaffected. Here, we dissect two key points from the Budget and explore its implications
1. Capital Gains Tax for Residential Properties Set to Reduce to 24%
In a surprising turn of events during today's Budget announcement, the Chancellor revealed a reduction in the top rate of capital gains tax (CGT) applicable to the sale of residential properties. Effective from April 6, 2024, the higher rate of CGT will see a decrease from 28% to 24%.
According to the accompanying policy paper, the government claims that this change aims to "encourage earlier disposals of second homes, buy-to-let properties, and other residential properties where accrued gains are not fully covered by private residence relief (PRR)." The rationale behind this move is to stimulate increased activity in the property market, thereby benefiting individuals seeking to relocate or enter the property market for the first time.
One might be tempted to speculate a connection between this announcement and the forthcoming abolition of the furnished holiday let regime, slated for April 2025. However, it's worth noting that certain disposals made before this may still be eligible for business asset disposal relief, provided they meet the requisite criteria.
The immediate repercussion is expected to be a delay in some residential property sales, as individuals seek to wait under for the lower CGT rates. Budget estimates indicate an initial loss of £70 million in income for the fiscal year 2023/24, with projections of subsequent revenue increases in the following years.
2. Jeremy Hunt Avoids IHT Reductions or Amendments
During his announcement, Jeremy Hunt opted against implementing any reductions or alterations to inheritance tax (IHT). Speculation had previously been rife regarding the possibility of the government slashing the headline rate or even abolishing IHT altogether in this budget session. However, contrary to these rumours, the Chancellor refrained from introducing any cuts to the tax. While there were murmurs of an IHT reform circulating, cautionary voices had warned against the feasibility of such cuts, citing concerns over the potential financial strain it could impose on the government at present.
For individuals with estate planning considerations, the announcement of an impending IHT review underscores the importance of staying abreast of developments in tax policy. While the absence of immediate changes offers a reprieve, proactive engagement with professional advisors remains crucial to anticipate and adapt to potential alterations in the IHT landscape in the not-so-distant future. By taking a proactive approach, individuals can optimize their estate planning strategies and safeguard their assets for future generations.
What does this mean for you and your tax planning?
In conclusion, the most important takeaway for Qubic Group clients is that the Spring Budget yielded no changes that directly impact the firm's tax planning initiatives, therefore providing a sense of stability and reassurance in their existing tax strategies and business operations. By closely monitoring legislative developments, Qubic Group can deliver tailored, effective tax planning solutions that align with clients' objectives.
How Can Qubic Help?
At Qubic, we believe that staying proactive in tax planning is key to ensuring that you and your business are ahead of the game. We have a team of experienced professionals who can help you navigate the complex world of tax planning and provide you with tailored solutions to optimise your tax and non-tax goals.
One of the most important steps you can take to prepare for potential tax increases is to review your existing tax structure. By analysing your current setup, we can identify any potential tax savings opportunities that could help offset any potential increases.
We understand that the uncertainty surrounding tax changes can be challenging, and we are here to help you.
For more information on our tax planning services and to discuss your options with one of our team, simply click the link below:
Get in touch: If you're ready, let's talk!
Email: info@qubic-group.com
Call: 0191 232 2001
Kind regards,
QUBIC