Inheritance tax ignored, but investment boosts introduced
Spring Budget special report.
By Edie Bourne
High-achieving doctors may have been disappointed that, once again, inheritance tax was left out of the latest fiscal announcement. The Chancellor’s pre-election Budget last week presented very few major declarations.
Instead, we saw a series of smaller, crowd-pleasing initiatives such as further National Insurance (NI) cuts. Employees, who were paying 12% NI before the change in January to 10%, will now pay 8% from 6 April.
The self-employed, who were due to have a reduction in April on Class 4 NI contributions from 9% to 8%, will now see a drop to 6%. As detailed in the Autumn Statement, Class 2 NI contributions will be removed from April.
George Uglow
George Uglow, chartered financial planner at Cavendish Medical, told Independent Practitioner Today: ‘For the vast majority, any decrease in outgoing payments is welcome.
Income tax brackets
‘A change in the income tax brackets had been rumoured and could have been a better boost in these times of high inflation, but what effect would this have on public services, which are already under strain? The concept of fiscal drag means more workers are hitting tax brackets sooner and moving into higher rates of tax.
‘The current inheritance tax (IHT) threshold has been frozen since 2008 – and is set to remain at that rate until 2028. When we consider the increase in property prices during that 20-year period, it is easy to see how many more estates will be paying IHT without careful planning.’
The Chancellor also announced a cut in the top rate of capital gains tax (CGT), which applies to the disposal of residential property.
From 6 April 2024, the higher rate will drop from 28% to 24%. Residential property sales that fall within the basic rate band will remain unchanged at 18%.
Second homes
The Government policy paper stated that this initiative is expected to ‘generate more transactions in the property market’ and ‘incentivise earlier disposals of second homes, buy-to-let property and other residential property where accrued gains do not fully benefit from private residence relief ’.
There will also be a new ‘British ISA’ introduced from April, giving an additional £5,000 tax-free allowance for investments in UK companies on top of the current £20,000 limit. This is designed to support the growth of UK businesses and boost the domestic equity market.
New three-year fixed-rate British Savings Bonds will be released by NS&I in early April. These bonds will be the new Guaranteed Growth Bonds and Guaranteed Income Bonds which were last on sale in 2019.
Mr Uglow explained: ‘Like other NS&I savings vehicles, these bonds will be backed by HM Treasury and are likely to be popular, given the security that they can provide, but the interest rates have not yet been announced.
‘This provides savers with a lower-risk option which can be explored as part of a wider financial plan. The new British ISA will be a welcome addition to those striving for tax efficiency.’
In good news for smaller businesses, the VAT threshold will rise from £85,000 to £90,000 and there will be an extension to the ‘full expensing’ tax relief for businesses making capital investments.