Should you be doing anything before this year's budget?

Investment & Wealth Advice

Clare Munro, Senior Tax Adviser

On 3 March 2021 Rishi Sunak is due to deliver his second Budget statement. While the UK’s vaccination programme is proceeding apace, it’s not at all clear that the economy is ready for tax rises to plug the pandemic-shaped hole in the nation’s finances. Nevertheless, rumours of tax rises persist, so what can you do to protect your position?

Mr Sunak’s decisions will be made harder by the Government’s manifesto commitment to avoid rises in the three most revenue generative taxes – income tax, VAT and national insurance – but that still leaves a few key areas for private clients vulnerable to increases.


Pension contribution relief rules have undergone many changes over the last two decades, but the system that gives higher rate tax relief on pension contributions (albeit now limited to an annual allowance of £40,000) is still perceived as unfair. Restricting relief to basic rate or limiting the carry forward of unused relief would tackle that criticism and raise revenue. So, if you are in a position to make contributions to your pension and, better still, to use brought forward capacity, it may be sensible to do so prior to 3 March.

Capital Gains Tax (CGT)

Capital gains tax (CGT) has also been widely trailed as a possible source of increased tax revenues. The Office of Tax Simplification (OTS) issued a report last year suggesting, among other things, that the distorting effect of keeping CGT rates lower than those for income could be resolved by closer alignment of the rates. They also suggested reducing the number of CGT rates from the present four. Whether the Government would want to risk discouraging taxpayers from disposing of assets standing at a gain remains to be seen; there are policy issues to address here. However, although it’s unlikely that rate hikes would be introduced mid tax-year, it’s not impossible, so if you are already intending to dispose of an asset that is standing at a gain, it may be prudent to do so pre Budget.

Inheritance Tax

Inheritance tax (IHT) reform is also on the agenda as two separate reports (OTS and All Party Parliamentary Group (APPG)) have given the Chancellor food for thought. A radical overhaul of IHT seems unlikely without some sort of consultative process, but the OTS’s recommendations to abolish some of the smaller exemptions and the relief for normal gifts out of income could be implemented fairly easily. The APPG’s proposed abolition of potentially exempt transfers and the ‘seven year rule’ would more appropriately form part of a major restructuring of tax on gifts and inheritances. Again, any change prior to 5 April seems doubtful, but, if you had planned to make gifts anyway, doing so prior to 3 March should secure treatment under the present tax system.

Will there be a Wealth Tax?

A new wealth tax is perhaps the least likely of the possible tax changes to be announced on 3 March, not least because the administration involved would require some serious advance planning. Ultimately, plans for dealing with the deficit will need to be formed at some stage and will almost certainly include tax increases. However, right now, deficit reduction is perhaps secondary to the equally loud calls for continued support from many sections of society. The considered response to pre-Budget planning is therefore only to take the action that was already on your ‘to do’ list, whether that’s making pension contributions, gifting or disposing of assets.  

How Weatherbys can help

If you don’t want to spend time creating and constantly updating your financial plans, then let us take care of everything for you. We can work out what you need at every stage of your life. We will help you structure your portfolio to allow for unpredictable market fluctuations. In addition, we will make sure investments maximise your use of tax-efficient structures.


Important information

Tax laws are subject to change and taxation will vary depending on individual circumstances. The value of an investment and its income can both increase and decrease and you may not get back the full amount originally invested.


No two families are the same and conversations around wealth transfer are often emotionally complex. Therefore a strong succession and Inheritance Tax plan is necessary to help navigate family dynamics and lay the foundations for generations to come.
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