**HMRC Warning: Act Now to Avoid a 25% Tax Raid**
Individuals managing their assets have received an HMRC warning to sign a crucial document promptly to sidestep a potential 25% tax hit. This alert comes as potential Labour-led tax increases loom in the upcoming Autumn Budget.
Tax expert Mark Routen, head of Tax at Hoxton Wealth, has cautioned that Chancellor Rachel Reeves may target capital gains tax, inheritance tax, and pension policies for hikes.
**Potential Increases in Capital Gains Tax and Property Taxes**
Routen predicts that capital gains tax rates might align with income tax rates. “This could cause an increase from 20% to 45%, and property tax could rise from 24% to 45%,” he noted. If you’re contemplating selling an asset, it’s essential to act now to complete transactions before the budget changes take effect.”
He emphasized that those intending to sell assets must secure a key document even before finalizing the sale. “Reaching the binding contract stage is what triggers the tax,” Routen explained. He also suggested strategies like rebasing assets by selling and buying back through a spouse or shifting them into an ISA or a family investment company to potentially save up to 25% in the long term.
**Act Now on Inheritance Tax**
Regarding inheritance tax, there could be significant changes. Routen noted that reliefs for farmers and unquoted businesses might end soon, making now the optimal time to act. “If you’re planning a gift, do it swiftly while current reliefs are still in place,” he suggested. Potential adjustments in the rate and other reliefs are also anticipated.
**Big Changes to Pension Policies**
Routen also highlighted possible “big changes” to pension rules, specifically to the tax-free lump sum and tax relief on contributions. “The cost of pension tax relief to the government is substantial and might be targeted in the budget. Labour could lower the annual allowance of £60,000 or set a flat rate of tax relief on contributions, which would predominantly impact higher or additional rate taxpayers,” he warned. He advised making contributions and withdrawing tax-free lump sums before the budget announcement.
**Final Thoughts on Dividends**
Additionally, the tax rate on dividends may increase. “If you’re planning a dividend or have significant retained profits, it’s wise to consider making a payment now,” Routen said.
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