There has been much comment on the events of the last few days. First, we had Noel and Liam Gallagher announcing that they are re-forming ‘Oasis’ for a UK tour in 2025. Then we had the Prime Minister, Sir Keir Starmer, making his bleak speech from the so called ‘Rose Garden’ of 10 Downing Street.
The photographs accompanying the Gallagher brothers’ announcement were characteristically noir and were convenient, albeit inadvertently, for Starmer in adding to the atmosphere of gritty gloom that characterised his speech. Indeed, an ideal context in which to trial “painful” tax rises as necessary to fix “an economic black hole”, together with a warning that “those with the broadest shoulders should bear the heavier burden.
“…it seems certain that there will be changes to CGT, IHT and the treatment of pensions…”
The Prime Minister’s speech increased suspicion that Labour had been preparing further taxes on capital assets since before the general election in July. Now, less than two months since their win, it seems certain that there will be changes to capital gains tax (‘CGT’), inheritance tax (‘IHT’) and the treatment of pensions, resulting in an increase in taxation across such assets and structures.
The disturbing politics is that these possible tax rises are to fix an allegedly inherited ‘hole’ of £22bn. This in fact amounts to 0.08% of government spending, of which £9.4bn has just been spent by the Labour government on non-conditional pay rises in the public sector, which could be perceived as heralding a period of ‘redistribution’.
There is little detail now and we will be watching developments as we approach Budget day on 30 October; nevertheless, clients should be talking to their advisers as to the steps it may be advisable for them to take now.
“…we could expect any changes announced in October to have effect from 6 April 2025.”
Convention is that tax changes come into force in the tax year following a Budget announcement. So, here we could expect any changes announced in October to have effect from 6 April 2025. However, recently we have seen the increased use of anti-avoidance measures such as those against ‘forestalling’, a device by which affairs can be engineered to bring forward transactions, to avoid anticipated higher tax in the future.
With that caveat in mind, though, there could be a case, for example, in looking at assets that are heavy with capital gains with a view to realising at current rates of CGT. One could also consider bringing forward possible lifetime gifts to take advantage of the current IHT regime. And there may be room for maximising scope for pension contributions now. There is also a range of vehicles, for example offshore bonds, that can be used to shelter underlying assets from CGT and defer income tax on those assets until a later date. All of which should be discussed with an adviser.
‘Oasis’ (who released ‘Don’t Look Back in Anger’ in February 1996) were, together with other distinctively British bands, such as ‘Blur’ and the ‘Spice Girls’, at the forefront of Britpop, part of ‘Cool Britannia’, a movement of renewed patriotic optimism after the political strife of the 1970’s and 80’s.
One beneficiary of this sense of national renewal was New Labour’s Tony Blair, who became Prime Minister following a landside general election victory in 1997. An architect of that victory was Peter (now Lord) Mandelson, who famously said in 1998 that New Labour was, “intensely relaxed about people getting filthy rich as long as they pay their taxes”. This remark, made when Mandelson was in Blair’s cabinet, was designed to reassure those with wealth.
Yesterday’s speech by the Prime Minister was anything but reassuring.