For the last couple of weekends you may have seen various headlines stating that the Chancellor wants to raise taxes in the upcoming Budget.
There’s been reports that Corporation Tax, Capital Gains Tax, Inheritance Tax and even pensions will be hit with increased tax rises.
So is no one safe? Are we heading for a period of much higher taxation? If we are, there are three things you need to do.
The difficulty with the upcoming Budget
At the time of writing, the date of the next Budget has yet to be announced although it is expected to be some time in November.
This upcoming Budget will be a difficult one for the Chancellor as we emerge from one of, if not the biggest economic shocks we have ever faced.
The budget deficit this year is expected to be £350 billion, twelve times what was expected pre-Covid-19.
So it’s right to think that at some point the UK’s finances will need to be repaired.
But is now the time to do it?
Many businesses are yet to re-open and many are servicing customers way down on their normal levels as they implement Covid-19 restrictions.
The Furlough scheme has been relatively successful so far in saving jobs but has it just prolonged the inevitable as the scheme winds down?
The Conservatives also have another problem. Admittedly it was a very different time when launched, but their last election manifesto stated that they would not be raising Income Tax, VAT or National Insurance during their time in government. Will they have to break this promise?
What you need to do before and after the upcoming budget
Headlines around tax rises before an upcoming Budget is lazy journalism.
Any government before any Budget will review all taxes and it is right to do this. So it’s no surprise to read Capital Gains Tax and the like are being looked at. But this doesn’t mean taxes will rise.
Yes the government does have an issue with the amount of debt it has taken on to get through the crises. But there are other ways the government can pay this debt back rather than just tax rises. We covered this in a recent blog which you can find here.
Worrying and panicking about potential rises in an upcoming Budget is not helpful. It could lead you to feel pressured into making a decision with your money based on guesswork.
Take pensions for example. Ever since I started work as a Financial Adviser, every year there are rumours of changes to pension tax relief or the ability to access 25% tax free. Every year not much changes.
So had you cashed in your pension, or stopped making pension contributions, you would have missed out on years of tax free growth.
Rather than reading the headlines and trying to guess what the Chancellor is going to do in the upcoming Budget, follow these three rules:
#1 – Have a proper financial plan in place
Be clear on your objectives over the short, medium and long term.
When do you want to move, retire, gift money to children? How much will you need? How much do you need to save and what return on your investment do you need?
Having a clear plan means you can put together the perfect investment strategy to help you achieve your goals.
#2 – Review your plan following the Budget
A few days after the Budget, when the dust has settled and the announcements have been analysed in detail, look for opportunities and threats to your plan.
Have tax rules changed that mean it is better to save into a different kind of financial product over another?
Is now the time to retire instead of waiting a bit longer?
#3 – Make adjustments to your plan if necessary
Based on the outcome of point 2 above, you may need to adjust your plan but you should only do it after a review of the Budget, not before.
So there you have it. A stress free way of dealing with any upcoming Budget. Better still, for a limited period we are currently offering a free portfolio review (normal price £497). By claiming this offer below you will receive a report outlining the performance of your portfolio, charges you are paying and the risk level you are taking moving forward.
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