We will also be discussing this in more detail at our seminar on 5th December, which you can sign up to here.
If you have any questions regarding the UK General Election, please contact your usual Withers contacts.
Note: We have provided a transcript of the video if you are unable to listen to the audio. This transcript is generated using a combination of speech recognition software and human transcribers and may contain errors.
We're always looking for opportunities to help our clients see around corners and in the current political climate, that's been increasingly difficult. But now we have election manifestos the theme seems to be spend, spend, spend, but what are the parties saying about funding this, what are they saying on tax. I'm going to have a look at the manifestos for the two main parties and let you know what they're currently saying on income tax and capital gains tax and what steps you might want to take now.
Starting with Labour, with Jeremy Corbyn having who he calls 'the super rich' firmly in his sight, we're definitely going to see changes to income tax. The proposals are for the 45% tax threshold to be dropped to £80,0000, and a re-introduction of the 50% tax rate that we last saw under Gordon Brown. But this time it will be re-introduced at a level of £125,000. What else might we see? The dividend rate would be going up, so that would be equalised with the tax payer's top rate of tax, and this coupled with a predicted rise of corporation tax to 26% is likely to mean for individuals that the corporate planning vehicles they've used in the past to hold their wealth may well be off the cards. By contrast, looking at the Conservative manifesto, Boris Johnson has promised not to increase the rate of income tax at all during the next parliament, and has pledged to lift more taxpayers out of the 40% tax band. No great surprises there.
Capital gains tax - what might we see in capital gains tax rates? Jeremy Corbyn has promised that capital gains tax rates, which are currently 20%, would be equalised with income tax, which are planned to go up to 50%. This is to address increasing inequality and wealth in society. One of the other more controversial aspects of the manifesto which was set out in the funding paper was the abolition of entrepreneurs' relief. This is the 10% tax rate that business owners pay when they sell their businesses and given the plan to equalise income tax and capital gains tax you would see these taxpayers rise in the tax that they pay from 10% at the moment, to 50%. And what about the Conservatives? Well, Boris has pledged not to increase income tax, VAT, or national insurance but no mention has been made of capital gains taxes. Perhaps we might see, at some point in the future, an increase from the current (by historical standards) fairly low rate of 20%.
So what should you be doing now? Potentially thinking about accelerating your income under the current rates. So if you are able to that might mean taking dividends out of companies, that might mean accelerating bonuses, even taking distributions from offshore trusts, or triggering remittances now whilst we know what the tax rates are. What about capital gains taxes - what steps should you be taking now? Certainly rebasing your portfolio and taking gains now at the known rate of 20% is something you might want to think about doing. If you're a business owner that currently benefits from the 10% entrepreneurs' relief rate, things are a little more difficult, but there are certainly steps you could take to trigger and bring forward that gain now, if you wanted to. So more generally looking forward, what should you be thinking about? What seems likely is that taxes will rise whoever is in government, so tax deferral will be the name of the game, and that is where can help.