CUTS ARE COMING AND THEY WILL BE DEEP
Cuts. That will be the word of the next few months. And with the ConLibDem Government in place we know some of those that will be made. More will be announced in the Budget expected towards the end of June. But you can act now to avoid some of them.
Get married. Married couples will be able to transfer some of their tax allowance between them, probably this year. The change could mean £5 a week less tax where one spouse pays tax and the other does not. And for those already married it is worth rearranging your income – from savings or investments for example – so one partner does not pay tax.
Spend your inheritance. The proposed rise in the Inheritance Tax threshold to £1 million has been postponed, for at least five years perhaps forever. So couples with an estate of more than £650,000 or singles with one of more than £325,000 should use their tax free gift allowances to bring the amount down to avoid tax for their heirs when they die.
Take capital gains. Big rises in capital gains tax are planned to pay for other tax cuts. The present rate of 18% may rise to 20% or 40% depending on the individual’s marginal tax rate. The limit for gains free of tax may be cut from the £10,100 fixed for this year. So if you have made capital gains it may be safest to take them now before the changes are announced. And spouses who pay different rates of tax may want to consider transferring property to the one paying the lowest rate (or none at all).
Claim child tax credit. Both parties promised to take child tax credit away from those on higher incomes. The Conservatives plans would start the cuts for those with a family income around £40,000. But the Lib Dems would start much lower – around £25,000. So anyone not claiming their child tax credits with income at those levels or above should claim now. It is unlikely that the money would be taken away at once but new claims are likely to be stopped soon. Find out if you or yours can claim at www.entitledto.com.
Pay into Child Trust Funds. The second certain casualty is the Child Trust Fund. At the moment every new born baby gets £250 paid into their own Child Trust Fund and children whose parents have a joint income less than around £16,000 get £500. Tories would end the £250 payment confining the Fund to low income families. The LibDems would scrap the Fund altogether. Though it isn’t clear what either party would do with existing accounts. They will probably be allowed to continue but with no further payments from the state. But if you are planning to put a bit extra into a child trust fund for a child or grandchild it might be sensible to bring the payment forward before any changes are made.
Delay selling your home. Both parties are committed to ending the Home Information Pack which the seller of every home (in England and Wales) has to provide. Typically the pack costs between £200 and £500 and the seller pays. Although the pack itself will be scrapped, the energy efficiency certificate will probably remain so the cost will not disappear altogether.
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