The buzz around the Budget is deafening, with endless speculation and proposals affecting everything from income tax to council tax.
We recently asked people what taxes they were most worried about changing in the Budget, and almost one in four people were so confused by the rumors that they said they didn’t know what they were most worried about.
Rumors and speculation make planning your way through the dangers very difficult.
Fortunately, you don’t need to know exactly what the speech is going to be before you can take precautions.
Here are five things you can do before the Budget – regardless of what ends up being announced.
This is not personal advice. ISA, pension and tax rules are subject to change, and their benefits depend on individual circumstances. If you’re not sure what’s right for you, ask for financial advice.
Investing for five years and increasing your chances of getting a good return compared to a savings account. However investments can go up and down in value, so you may get back less than you invested.
1
Build a pension
If you are worried about a possible change in income tax, contributing to a pension such as a Self-Invested Personal Pension (SIPP) ensures that there is no income tax to pay on this part of your income.
If you pay income tax at a higher rate and are concerned about reducing your pension tax, there is an added benefit of taking advantage of the rules while they stand and getting tax relief at your highest rate.
This should not force you to put the money you need for daily use, but if you have money, it is a special tax procedure before the Budget.
However, remember that you can only get a pension from 55 (going up to 57 in 2028). The amount you can put into your pension and get tax relief depends on your circumstances.
A Stocks and Shares ISA will protect you from potential tweaks to things like capital gains tax (CGT) or income tax.
By investing in a Stocks and Shares ISA, you don’t pay CGT, when you sell or exit, and whenever you rebalance your portfolio as you go. There is also no UK tax.
What’s more, for those who make money from savings interest, you can use a Cash ISA to protect yourself as much as possible from income tax – if the personal savings allowance or tax rules change.
It makes sense to use the system fully as it is, before the speech, so you can be sure of the rules and benefits. You can even add money now and choose your investments and savings later if you’re not sure what’s right for you right now.
3
Use Share Exchange (Bed and ISA) for existing investments
If you have investments outside the tax brackets, and you have an ISA or pension this year, it’s a good idea to consider moving some of them to a tax-saving environment.
The good news is that this can be a straightforward process, through a Share Exchange – now known as a Bed & ISA or Bed & SIPP.
You can sell assets out of an ISA or pension, keeping your £3,000 annual CGT allowance in mind when you sell, and buy them back into an ISA or SIPP wrapper all in one order. From here they are protected from future UK tax and CGT.
Before using Share Exchange make sure you check all the details like fees.
If you are married or in a civil partnership and your partner pays a lower rate of tax, you can transfer income-producing assets into their name. This way you can take advantage of your ISA and tax returns, and the rest is taxed at their rate rather than yours.
But don’t forget the children.
In the current tax year, you can save or invest £9,000 in a Junior ISA for any eligible child, and interest, dividends or capital gains are tax-free.
If inheritance tax (IHT) is on your list of concerns, there are allowances you can use to make immediate IHT-free gifts to children and grandchildren. Once a parent or carer opens a Junior ISA, it’s a great way for friends and family to make gifts today that will tie in until the child turns 18 – and is old enough to make adult decisions about spending money.
5
Take financial advice
It can be very difficult to know what to do in uncertain times, especially if your financial situation is complicated.
There are many people who are happy to work with theories and focus on the movements that are right for them. But if you’re worried about making a mistake, or struggling to balance competing demands, getting advice can give you real peace of mind.
However, it is important to think of a logical way to use this opportunity before closing.
Are you thinking about financial advice? Get started by requesting a call with our team of consultants
If you think you could benefit from getting expert financial advice from an expert, get started by booking a call with our team of advisors today.
You won’t get your advice over the phone, but they will talk you through the advice services we offer, including fees and put you in touch with an adviser if you want to continue.
Our consultants can recommend how to best use your tax returns through financial planning. But if you need more complex tax calculations, your adviser may recommend that you speak to an accountant to supplement their advice.
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