With the budget looming and growing speculation about the changes the new government will implement, we sat down with Eggar Forrester's Finance Director Rakesh Zaveri to see what he thinks the possible implications will be for our clients.
Rakesh, which areas of tax do you think will see the biggest rise?
The one that everyone is talking about is Capital Gains Tax. We are expecting to see a percentage hike so anyone with a second property is likely to pay more tax when the property is sold. This could be standardised at the current top rate of 28% or could be brought in line with normal income tax rates. If you're looking to sell an asset, then it might be worth doing this now so that you can benefit from the lower level of Capital Gains Tax. An alternative might be to transfer the ownership to a Limited Company, and out of your personal name — though this is something you'd need to seek proper financial advice on.
Do you expect to see any changes that will impact the insurance market?
There is a chance that Insurance Premium Tax (IPT) will be put in line with the VAT rate of 20%. IPT is currently 12%, so it would make sense to bring it in line with VAT, which is also a sales tax. This would see insurance premiums rise and there is no relief on this tax. Insurance premiums are going up because RPI is increasing, as are material costs, but it's still worth making sure you have the correct level of cover.
What can I do to get around Insurance Premium Tax increases?
Unfortunately, there isn't much you can do — the tax is added to your premium. However, by working with your insurance broker, check you have the correct level of cover, your valuations are up-to-date and correct, and the risks that you have assessed are correct. Six weeks before your renewal is due is a good amount of time — this gives two weeks to assess your needs and then 30 days to review the best products on the market, as insurers can only provide an accurate quote four weeks before renewal.
Are there any other places where we are likely to see an increase?
I think it's likely that we will see some changes to VAT, more costs being included under the standard rate (20%), and they will most likely make a change to Inheritance Tax (IHT) allowances. I'd recommend speaking to an accountant if you have any assets that will be impacted by IHT.
If you've got questions about your insurance policies, book in with a broker at Eggar Forrester Insurance to discuss your renewals.