News

Welcome to our October 2024 tax news!

Our monthly newsletter covers a range of tax related topics as well as celebrating what we’re doing as a company.

Topics covered this month includes:

• Fundraising for Parkinson’s UK – inflatable 5k run.
• Possible changes in the October budget including capital gains tax and pensions.
• Beware ‘bed and breakfast’ anti-avoidance.
• Celebrating 20 years at Gascoynes.
• HMRC letters – nudge and scam letters.

You’ll also find below useful dates for your diary this October and November.

Please contact us if you have any questions regarding any of the articles or if you would like further information on a topic we haven’t covered.

Your views are always important to us and we welcome your feedback.

Fundraising for Parkinson’s UK

On Saturday 12 October a team of us will be running an Inflatable 5K in aid of Parkinson’s UK!

Thomas Buckley-Smith, Lilly Chipchase, Mark Thurston, Daniel Royal, Emily Oakes, Harmony Hagger, Jack Ainsley and Nellija Zukova will be taking on over 30 inflatable obstacles at the Norfolk Showground.

We’re supporting Parkinson’s UK this year in support of a colleague who’s friend has been diagnosed with Parkinson’s. Seeing firsthand the affect Parkinson’s can have on a person’s life and the pressure it puts on families, we want to help support in any way we can.

If you’d like to support our fundraising efforts, you can donate to our JustGiving page here.

Your donations can help hospitals to fund new innovative treatments for Parkinson’s and just £40 could pay for an hour of care from a specialist Parkinson’s nurse.

To find out more about Parkinson’s UK, please visit the Parkinson’s UK website.

Possible Capital Gains Tax (CGT) changes in the October budget 

Many commentators are suggesting that the rate of CGT might be aligned with the rates of income tax, a return to the regime that applied when Gordon Brown was chancellor. Rachel Reeves is known to be a disciple of Gordon, so maybe we will see a return to taper relief as well!

One would hope that Business Asset Disposal Relief (BADR), or something similar, is retained to encourage entrepreneurship and growth. She might even reintroduce Business Asset Taper, one of Gordon’s ideas, to reduce the effective CGT rate to 10% after 10 years’ ownership? If some form of CGT relief to encourage entrepreneurs is retained then maybe the conditions for obtaining the relief will be tightened still further?

Other possible changes to CGT to listen out for include further restrictions to private residence relief and changes to hold over relief for transfers into and out of trust. A more controversial change would be the removal of the CGT free uplift to probate value on death, with beneficiaries inheriting the deceased’s CGT base cost of their assets, as suggested by the now abolished Office of Tax Simplification (OTS).

Should be bring forward asset disposals before budget day?

CGT changes normally take effect from 6 April, but there have been mid-year changes in the past. This possibility has caused many taxpayers to bring forward disposals to take advantage of the current rates.

The disposal date for CGT is the date of unconditional exchange of contracts and there is likely to be anti-forestalling legislation to counteract attempts to artificially bring forward the disposal date.

There is still time to sell listed investments before 30 October but other assets such as a business or property typically take a lot longer to sell unless a buyer is already lined up.

Beware “Bed and Breakfast” anti-avoidance 

Many investors may be looking to realise capital gains on their investments at the current rates, just in case there is an increase with effect from 30 October 2024.

They may then wish to repurchase those investments after the change in rates to retain the balance of investments in their portfolio.  Where the same shares and securities are bought back within 30 days of the date of disposal, the shares bought back would be matched with those sold and the desired capital gain and increase in base cost may be negated.

For example, if 1000 shares in A plc were bought for £2 a share several years ago and are sold on 29 October 2024 for £4.50 a share there would be an apparent £2,500 capital gain, potentially tax free if the £3,000 2024/25 CGT annual exemption is unused. However, if the same class of shares in A plc are purchased on say 5 November 2024 for £4.45 a share there would be a £50 capital loss instead of the desired capital gain and the base cost would remain at £2 a share. This is because the repurchase is within 30 days.

An alternative strategy would be for the taxpayer’s spouse to repurchase the shares (“bed and spousing”) or to repurchase the shares in the taxpayer’s ISA or pension fund.

Celebrating 20 years at Gascoynes!

We’re celebrating Directors, Ashley MacDonald and Thomas Buckley-Smith who have been at Gascoynes for 20 years!

Ashley oversees the accounts and taxation affairs of a broad range of clients, from limited companies to sole traders. Gascoynes’ wide portfolio means he and his colleagues are well equipped to offer advice on tax planning and business finances.

Thomas has built close and trusted working relationships with clients, and his portfolio ranges from sole traders to partnerships and large limited companies. He particularly focuses on service charge accounts, tax and capital allowances rules, VAT and personal tax.

Join us in congratulating them both on their 20 years service!

Rumours of pension changes in the October budget

Changes to pension tax relief seems to be top of the list of possible changes in the Budget and could yield more tax revenues than changes to CGT and IHT combined. As recently as 6 April 2023, we saw the abolition of the lifetime allowance charge and a significant increase in the pension annual allowance to £60,000 a year, which Rachel Reeves commented were too generous, so we may see those changes reversed or curtailed.

Possible changes to pensions to listen out for include:

• Limiting pension tax relief for individuals to basic rate or possibly a 30% flat rate;
• Further limiting (or abolishing) the 25% tax free lump sum;
• Freezing or reducing the £1,073,100 lump sum and death benefit allowance;
• Making the undrawn pension fund subject to inheritance tax; and
• Limiting the amount of employer pension contributions that can be paid by way of a salary sacrifice.

Pension changes normally take effect from the start of the tax year on 6 April, however there have been mid-year changes in the past. Taxpayers should therefore consider bringing forward pension planning just in case changes are effective from the date of the announcement.

Many over 55’s can withdraw 25% of their pension fund tax-free

Under current pension rules, many pension funds allow pension scheme members to withdraw up to 25% of their pension savings tax-free. Finance Act 2023 limited the tax-free amount to £268,275 unless the individual had applied for protection at a higher amount. There are rumors that the tax-free amount may be further limited, with an amount of £100,000 suggested, and this has resulted in significant withdrawals from pension funds in recent weeks. It should be noted that there are anti-avoidance rules that limit the amount that can be reinvested in the pension fund within a 12 month period.

Pension lump sum “recycling” is countered by anti-avoidance rules where the lump sum withdrawn is more than £7,500 during a one year period and subsequent pension contributions are increased by more than 30% of the lump sum.  A breach of this rule will mean that the lump sum is an unauthorised payment and will be taxed at 40%.

Check your state pension entitlement

The current State Pension is £11,502 and is due to rise to around £12,000 a year for 2025/26. At current annuity rates it would cost over £300,000 to receive an index-linked annuity starting at £12,000 a year, so it’s important to maximise your entitlement.

In order to receive a full State Pension you need 35 qualifying years, but is it worth topping up voluntary Class 3 National Insurance contributions in respect of missing years? This is a financial decision but there is a short breakeven period. It is around 3 years for employees and even shorter for the self-employed who can pay Class 2 contributions for missing years. You can also get credit for missing years if you were not working because of bringing up children.

Employees need to make Class 3 contributions of £824.20 or £907.40 a year for extra years which yields £302.86 a year in additional annual state pension.  Self-employed individuals can pay Class 2 contributions at the rate of £179.40 for each missing year to yield £302.86 per annum.

Normally you can only go back six years to make up missing contributions but there is currently an opportunity to fill up missing years going back to 2006/07 – note that the deadline for the extended carry back is 5 April 2025.

Sponsoring Stuart Turner

Gascoynes are pleased to sponsor rugby player Stuart Turner of Bury Rugby Club!

To find out more about Bury Rugby Club, including latest fixtures, visit their website here.

HMRC Letters

“Nudge” letters being sent by HMRC to taxpayers 

HMRC have recently increased their use of “one to many” or “nudge” letters to taxpayers which suggest that there may be errors or omissions in tax returns or accounts information.  HMRC argue that these letters are a key tool in their compliance strategy but this is essentially a “fishing” expedition more akin to direct mailing and this may alarm many taxpayers who are completely innocent.  Please get in touch with us if you receive such a letter and we can deal with the matter on your behalf.

Beware of “scam” letters claiming to be from HMRC

We have also become aware of scam letters and emails purporting to be from HMRC being sent to taxpayers. These letters request important personal information which would be needed by fraudsters to access your data. If you have doubts about whether a communication from HMRC is genuine, please contact us and we will check its authenticity.

Key tax dates for September/October

If you have any queries on the topics discussed in this newsletter, or any other accounting needs, please do not hesitate to email your client manager, or call the office today on:

01284 755956 for Bury St Edmunds Office

01953 438450 for Wymondham Office

01473 212717 for Ipswich Office

We look forward to speaking with you soon!