David Cameron has promised a tax freeze on income tax, national insurance contributions and VAT, and therefore has restricted scope to raise additional tax revenues.
People with corporate and property transactions already in the pipeline are being advised to ‘bank’ the current CGT rates now before any possible increase in the July 8 Budget.
Another likely source of revenue could be new restrictions on pension contributions for additional rate taxpayers. The Conservative party manifesto included proposals to reduce tax relief on pension contributions down from £40,000 for those earning more than £150,000 on a sliding scale so that the annual allowance would be reduced to £10,000 for those earning £210,000 or more. The changes would fund the proposed new inheritance tax allowance for family homes.
Nigel Green, CEO and founder of deVere Group, has also urged Britain’s higher earners to review their tax relief on pensions ahead of Chancellor George Osborne’s post-election Budget.
Geoffrey Todd, a partner in the Private Client and Tax team at Boodle Hatfield, said:
"The Government’s ‘tax lock commitment’ leaves it with less flexibility as to how to raise revenues, and with significant savings and cuts to be made it will need to look at fresh sources.
“Increasing capital gains tax rates and revisiting pension relief for higher rate taxpayers are obvious areas.
“Those selling real estate could, where possible, look to exchange contacts before July 8 to take advantage of the current CGT rates (18-28%) pre-empting a possible rate rise.
“Higher earners currently receive tax relief on pension contributions up to 45%. We would not be surprised if the Chancellor announced changes to this relief in next month’s Budget. It may therefore be sensible for individuals who have not made full use of this relief to do so before the Budget. Under the current rules an individual can pay contributions relating to the previous three years in addition to the present year, so a sizeable chunk of money can be contributed all in one go.”
