Think carefully before embarking on the “great giveaway”
This month’s budget is hotly anticipated and there have been no secrets surrounding some of the tax raids that are potentially on the horizon. But, as speculation continues, be sure to think carefully if you’re planning to pass on cash or property.
The “Great Giveaway”
There’s been a spike in plans from parents and grandparents wanting to pass on assets in what has been dubbed “the great giveaway” ahead of the government’s Budget statement on 30th October.
Second homes, buy-to-let properties, businesses, stocks, cash and even farmland are just some of the things being moved around by families convinced that any Capital Gains Tax (CGT) or Inheritance Tax (IHT) changes could be brought in with immediate effect.
The sudden move of assets has been triggered by Labour’s first Budget in office, where there have been hints that both CGT and IHT could be under the spotlight.
CGT is payable on the profit made from the sale of any property that is not your main home. It is also payable on businesses, shares and other possessions worth more than £3,000, however, it is also triggered when such assets are given away, calculated by its gain in value.
The controversial IHT is charged on your estate when you pass away. At this current time, every individual has a tax-free IHT threshold of £325,000, which increases to £500,000 if your estate includes a family home that is left to a direct descendant. Anything over and above that threshold is charged 40%.
Why could these taxes suddenly be thrown under the spotlight for review?
Labour has already promised not to introduce any changes to Income Tax, VAT and national insurance, but, it has said it is likely to carry out a raid on the taxes that are deemed to help the wealthy - including IHT and CGT
Chancellor Rachel Reeves is also rumoured to be considering raising CGT in line with Income Tax, which means higher and additional taxpayers would pay up to 40% or 45% respectively on their profits, where at the moment it is just 20% and 24%.
In real terms, that could mean someone intending to give away a £600,000 property now with a £250,000 capital gain would see a higher rate tax payer pay a £60,000 CGT bill, as opposed to potentially risking a £112,500 CGT bill after the 30th October Budget.
Before you jump on the bandwagon - take care
The transfer of assets can take some weeks, so if you’ve not already started the process you might be too late. In which case, you might consider other options - don’t forget about the seven-year rule for example when it comes to gifting money, as sources have hinted that it is unlikely the seven-year rule will be touched.
Also, if you are married or in a civil partnership and intend to pass your family home on to direct descendants such as children or grandchildren, your enhanced IHT threshold is combined allowing you to pass on up to £1 million in assets, and it is thought this threshold is also likely to remain untouched for now.
If you do plan to transfer any assets, make sure you take care and seek advice from legal experts as there could be some hidden surprises along the way if you fall foul of the rules.
Contact Downs Solicitors to see how we can help.
