Tax rates – where now?

In a leak hardly deserving of the name,  we have learnt the Treasury is considering options to cover the huge dent to public finances inevitably wrought by the ongoing lockdown.

Amongst the options considered are, inevitably, tax increases.  While there is a valid and interesting economic debate to be had around whether tax increases as opposed to tax competitiveness are the way forward, we should probably be realistic and steel ourselves for a coming high tax environment.

Although tax rates do not normally change part way through a tax year, in principle they can and we should be prepared for tax increases in potentially a summer budget, or the autumn statement.

Looking for a silver lining, one of upsides of currently depressed asset valuations is the possibility of longer term planning when values are low.

Normally lifetime gifting triggers taxes such as capital gains tax (unless exempt, for example between spouses) and starts the seven year clock running for inheritance tax.

At present, if assets are standing at a loss it is very much worth considering bringing forward any lifetime planning intentions.  This is all the more so if the family business is in point, and indeed now is an opportune time to focus on business succession and structuring, as well as general lifetime planning.

If capital gains tax rates increase and/or inheritance tax reliefs are restricted, it will be ever more costly to implement succession planning.  The ongoing weeks of (modified) lockdown are a moment to put in place plans before the anticipated increase in tax rates.