Brits have just weeks to beat Starmer tax raid – expert names four things you must do now | Personal Finance | Finance

Conservative Party chancellors have been setting tax and pensions policy for the last 14 years and we could see a dramatic shift if Labour’s shadow chancellor Rachel Reeves takes charge at the Treasury. Personal taxes are the highest since the war but Reeves could push them higher still, so families should see what they can do to reduce their exposure.

With the public finances in a mess, and Labour keen to raise money to fund its spending plans, things could get sticky. Reeves could announce a string of tax hikes if she delivers this year’s Autumn Statement. There’s even a chance she could line up an emergency Budget shortly after taking power.

Time is tight but Andrew Tricker, director of Lubbock Fine Wealth Management, suggested four steps to consider ahead of the election. The first is to sort out your pension.

Chancellor Jeremy Hunt increased the pensions annual allowance from £40,000 to £60,000 from April 6, 2023, allowing people to contribute more.

There is a chance Labour could reverse that or even slash it as low as £30,000 or £20,000. “If worried, make as large a contribution to your pension today as you can afford,” Tricker said.

Hunt abolished the pension lifetime allowance from April 6 this year, which caps the amount people can build up in company and personal pensions to just over £1million, with the surplus taxed at a punitive 55 percent.

As I wrote yesterday, Labour has pledged to re-introduce the lifetime allowance if elected, although it has since gone quiet on the proposal.

„There is a great deal of uncertainty so the most prudent course of action is add to your pension whilst you can,” Tricker said.

While Hunt has made life easier for pension savers, he has been tough on those generating capital gains.

He has cut the capital gains tax (CGT) annual exempt amount twice in two years, from £12,300 to just £3,000 today.

Reeves and Labour leader Keir Starmer could go a step further and axe the exemption altogether.

This would see people pay CGT on the first penny of gains when selling assets such as antiques, jewellery, Bitcoin, property, their business or shares held outside of the tax-free Isa.

The second step families should take is to make full use of the current CGT allowance in case it shrinks or disappears altogether, Tricker added.

There is another worry. Basic rate taxpayers pay CGT at 10 percent which rises to 18 percent on second home and buy-to-let property sales, while higher rate and additional rate taxpayers pay 20 percent and 24 percent respectively.

Labour could hike CGT rates in line with income tax, so higher rate taxpayers could pay 40 percent on all of their gains, rising to 45 percent for additional rate taxpayers.

Higher earners sitting on a potential gain may want to realise it before Labour takes power, although this will not be easy with a second home or buy-to-let property, where selling can take months.

It may still be possible to beat a potential Labour CGT grab, as Reeves may not announce any changes until the autumn. Acting on speculation is risky so take advice.

As a third step, Tricker also suggested investing as much of this year’s tax-free Isa allowance as you can, just in case.

Labour has merely said that it intends to “simplify the Isa landscape”. It hasn’t suggested reducing the £20,000 annual limit, but nobody knows for sure.

Either way, with taxes likely to rise elsewhere, the more you can shelter from HMRC, the better.

Inheritance tax is often described as the most hated levy of all and as yet, we don’t know what the Labour Party will do with it.

However, many in the party would happily see a clampdown on inherited wealth, in the name of equality.

Tricker said the fourth and final step is to review your family assets and decide what to do.

This makes sense as frozen allowances and higher house prices mean many estates already pay more IHT, with a record £7.5billion handed to HMRC last year.

That could rise even higher under Labour, but could just as easily rise under the Tories unless they increase the £325,000 nil-rate band, frozen since 2009.

Paul Barham, partner at Mazars, said even modest estates are now liable for IHT and families should plan to reduce bills regardless of who takes power. “Maximise gifting and other IHT allowances, write a will and discuss your plans with loved ones”.

With luck, we’ll have a clear idea of what the two parties have in store for pension savers and taxpayers when they publish their manifestos. Unfortunately, at that point families will have even less time to sort out their affairs.

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