Wealth Management

How to keep your tax plan agile in an uncertain landscape

Adrian Howard
May 14, 2024

Regular checks will help you to respond to changes in tax policy and ensure you don’t miss out on any opportunities

At a glance

  • Recent tax-policy changes have left people wondering what the future might hold and how they can make reliable financial plans.
  • Checking in with us – and taking our Tax Health Check – will help you to identify whether you could be taking advantage of any reliefs or allowances.
  • Taking financial advice around tax planning can also ease concerns about policy changes and provide peace of mind even during uncertain times.

2022 was a tumultuous year, to say the least. The war in Ukraine, the cost-of-living crisis at home and political turmoil dominated the headlines.¬ Who would have thought at the start of the year that we’d see three different Prime Ministers residing at Number 10 and four chancellors moving in and out next door?

One consequence of the economic and political disruption that has marked 2022 has been a tax system that seems to be continually changing.

The tax drama started with Kwasi Kwarteng’s now notorious ‘mini-budget’ in September. He was quickly condemned as reckless; stock markets plummeted along with gilt prices and the value of the pound.

It wasn’t long before Kwasi was replaced by Chancellor Jeremy Hunt. He quickly reversed the bulk of the announcements made in the mini-budget and announced a new raft of tax changes in November’s Autumn Statement.

What was in the Autumn Statement?

The major tax changes include:

•The threshold for the 45% additional rate of Income Tax will drop from £150,000 to £125,140.
•The personal allowance and Income Tax thresholds have been frozen until April 2028.
•National Insurance thresholds are frozen until April 2028.
•The Inheritance Tax threshold is frozen until April 2028.
•The Capital Gains Tax (CGT) threshold will reduce from £12,300 to £6,000 in April 2023 and then to £3,000 in April 2024.
•The dividend allowance will be cut from £2,000 a year to £1,000 in April 2023 and £500 in April 2024.

Why is tax planning so important in light of the above?

These changing thresholds can have a significant impact on the amount of tax we pay. When thresholds fall, more people are subject to taxes that they might not have been previously. Freezing thresholds might not sound too punitive; however, as both wages and prices rise, more and more people will experience what’s known as ‘fiscal drag’.

It’s possible to legally reduce the amount of tax that you pay with considered tax planning – taking advantage of all your available reliefs and allowances.

How do you deal with financial uncertainty?

It’s not surprising that the changes have left many people in a quandary, uncertain of what the future holds and how they can make reliable financial plans.

Tax planning can be off-putting at the best of times. But Tony Wickenden, Managing Director at Technical Connection, says the good news is that no further change is expected, at least in the short term. “We know with certainty what tax is going to look like in 2023/24, and we can start planning around that.”

The key – particularly if you’re likely to be affected by changes to the shrinking CGT and dividend allowances – is to not leave it too late to start talking to us. “Tax planning shouldn’t always dictate how you manage your investments,” says Tony, “but in some cases, there may be opportunities to take advantage of current allowances before they are scaled back.”

By initiating plans before the end of the tax year, you may not be impacted as severely as you might have been had you left it until after the reductions have been implemented. It really is ‘use it or lose it’.

Get a Tax Health Check

As part of the consultation process, we can take you through our Tax Health Check. “Think of it as a bit like a screening, to help us identify whether there are any reliefs or allowances that you could be taking advantage of,” says Tony.

This can be done every year – irrespective of what is happening to tax policy.

And by talking to us on a regular basis, it’s possible to respond to changes in tax policy as and when it’s necessary and ensure you don’t miss out on any opportunities.

Although tax planning can feel like a chore, over the years it can make a huge difference to both your wealth and your financial security. But that’s not the only benefit.

“There are non-financial benefits of taking financial advice too,” says Tony. “People who take advice are less likely to worry about money and whether they’re paying the right amount of tax. They also feel in more control.”

To talk to us about your tax plan, and to make sure you’re taking advantage of the tax reliefs and allowances available to you before things change in April 2023, get in touch today

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief generally depends on individual circumstances.