Individuals should “make full use” of their capital gains tax allowance while they can ahead of the upcoming general election, according to Lubbock Fine Wealth Management.
Lubbock advised that, with a UK general election expected before the end of the year, there are several “key” financial planning steps that individuals should take.
With a Labour victory widely seen as the most likely outcome and party manifestos yet to be published, Lubbock stated it is “crucial” to take advantage of the tax breaks available now that are at risk of being altered or cut by a change of government.
One such area identified by Lubbock was the CGT allowance as it was recently halved to just £3,000.
An actual increase in the CGT rates is another fear for investors as higher rate taxpayers currently pay a 40 per cent tax rate on income above £50,271, but only 24 per cent for capital gains on property and 20 per cent for gains from shares.
The disparity has fuelled rumours that Labour could raise CGT rates to match income tax rates.
Consequently, Lubbock advised that, if any individuals were considering taking a profit from any investments they have, last year’s reduction in the CGT allowance is a reminder to use up the tax-free allowance in case CGT rates are increased.
Lubbock also advised individuals to make the most of changes to annual allowances for pensions, which was increased from £40,000 to £60,000 for the 2023/2024 tax year.
The wealth management firm added that a Labour government could mean the £60,000 allowance is at risk of being reduced and so individuals should take advantage of the 50 per cent increase by making as large a contribution to their pension as they can afford.
LFWM director, Andrew Tricker, said: “50 per cent is a huge uplift for tax-free pension contributions. When it comes to pensions, you should contribute as much as you can afford as soon as you can.”
Lastly, Lubbock advised utilising the full Isa allowance as the Labour Party has indicated it intends to “simplify the Isa landscape”, even though it is yet to provide details on this policy.
Tricker added: “Isas provide another way for people to save tax-free. Married couples can contribute up to £40,000 a year.
“There are many different types of Isa so it’s crucial to involve your financial advisers early and find the Isa that provides the best suits your investment objectives and your risk profile.
“What changes an incoming government would make to Isas remains unclear - which underscores the importance of fully using your Isa allowance where you can.”
tom.dunstan@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
