As part of the Tax Talks in Five series from Primondell the UK specialists in tax training
Episode 3 in the series, Jeremy Mindell discusses the upcoming Autumn 2024 pre budget
You can also read the talk in the transcription below
Transcribed by TurboScribe.ai
Welcome to Tax Talks in 5, brought to you by Primondell, UK’s specialist firm in tax training. When the Labour Party were campaigning to form a new government, Rachel Reeves told voters they could keep the national insurance cuts delivered by the Tories and that there would be more spending for public services. She promised higher investment, but also to control borrowing and debt.
She promised there would be no tax rises for working people. She promised to be generous, but also thrifty, to spend, but also to save. There’s non-stop speculation in the press about the £22bn black hole in the public finances.
I’m Sharon Portner, and in today’s pre-budget episode, Jeremy Mindell, Primondell’s director and expert on tax training, will delve deep and give us his take on whether Chancellor Rachel Reeves has made a series of near-impossible promises. What are we to make of this, and what should we expect? Welcome Jeremy. Please tell us, where do you think the government now stands before the budget? Well, Rachel Reeves has been doing what many chancellors have done before, which is rolling the pitch, setting expectations for tax rises, testing some ideas in terms of where the tax burden may rise, and seeing what public opinion would be, and indeed potentially expert opinion, about whether these tax rises would be effective.
She was very careful in the general election only to give three pledges, which was no rises in income tax, VAT or national insurance, and she also highlighted rises in private equity taxation, rises in VAT for private schools, and also rises in taxation for non-DOMs. However, as I pointed out in an article in Taxation in August, all three elements have their problems because when you look at a specific allowance or relief, normally those reliefs have been given for a reason, and you need to take into account the behaviour of people affected by those taxes as to whether you’re going to raise the money. So will there be more pupils in state education as a result of the VAT rises, which will reduce the savings? Will non-DOMs go abroad, therefore reducing the tax take? And the same would be true with private equity.
Will it decamp from Mayfair to Paris or Dubai if the tax reliefs specific to private equity disappear? Also, in the context of the total government spend of about £1.2 billion, neither the black hole of £22 billion nor the tax rises that we are led to believe are actually really material to the total state of the government finances. Having said that, the first budget is traditionally the one in which tax rises and, if you like, the medicine is given out, and the government hopes that by the time of the election, it can have more positive news in terms of spending and indeed taxation. That does not always work.
I mean, Norman Lamont raised taxes in 1993, and the government was pilloried for it in 1997. And indeed, tax rises, even at the beginning of a parliament, are often remembered at the end. Well, there’s also concerns over pension contributions, capital gains tax, inheritance tax and fuel tax.
So a lot to explore. What should you be thinking about in terms of your finances to meet her financial objectives? I think that the point would be is you should always keep your finances under some form of review. And you would want to think about how much are your daily expenses, what are you looking to save and for what purpose you’re looking to save.
So talk again about upping inheritance tax. And the question would be, do you then think about changing your strategies? And again, what I would say is that hasty decisions made now on the basis of speculation will often be wrong. If, for example, you’re thinking of giving away some wealth and you’ve been thinking about it for some time and you’ve got the wherewithal to do so, then potentially giving it away before the budget may be a good idea.
But doing it on the spur of the moment based on speculation is really not a good idea. The same would be true in terms of pensions. So if you’re thinking about putting in large pension contributions because you’re worried that your pension isn’t big enough, that may be a good idea.
Putting in a large pension contribution just because you’re worried about employers’ national insurance on pension contributions from companies may not be such a great idea if you haven’t really thought through what are you doing with your pension, what is the size of the pension that you need and what alternatives there may be. So accelerating plans that you’ve thought about is a good idea. Decisions like, for example, taking your pension lump sum because you’re worried about what may happen is based on speculation and has other consequences to it.
So again, that’s why long-term financial planning is always a good idea and budgets may accelerate good plans, but they shouldn’t bring into existence plans that would otherwise not be something that you would consider. Well, thank you. There’s a few days to go.
So let’s look forward to speaking to you post-budget to see if your predictions are right and your insight, of course. In the meantime, if you have any questions or comments on today’s episode or any budget or tax matter, please visit the website www.primmondell.co.uk or email Jeremy directly at jpmind20@gmail.com
Thank you, Jeremy.
The full budget can be read or downloaded here
https://www.gov.uk/government/publications/autumn-budget-2024
Transcribed by TurboScribe.ai
