You’ve now got just two weeks to escape Hunt’s inheritance, CGT and dividend tax grab | Personal Finance | Finance

On Thursday April 6, Hunt will hit Britons with a string of tax hikes that will pocket tens of billions for the Treasury.

It is still possible to fight back and reduce your exposure, but there’s no time to lose now.

Unless you’ve got an accountant on speed dial, you’ll have to do the legwork yourself at this late stage.

Hargreaves Lansdown has described this tax year end as “the most important in a generation” and few would dispute that given the scale of the tax onslaught.

From April 6, Hunt will slash the threshold at which we start paying capital gains tax (CGT) from £12,300 to just £6,000.

The CGT threshold used to rise every year with inflation, now it’s being wiped out. In 2024, it will fall to just £3,000.

At the same time, the amount of tax-free dividend income that investors can generate on shares or investment funds held outside of a tax-free Isa wrapper or pension plan will be halved from £2,000 to £1,000.

From April 6, 2024, it will be halved again to just £500.

Any dividend income above that will be taxed at 8.75 percent if you’re a basic rate taxpayer, while higher rate taxpayers pay 33.75 percent and additional rate taxpayers 39.35 percent.

The £325,000 inheritance tax threshold has been frozen since 2009. Thanks to Hunt, it will remain frozen until at least 2028, dragging more middle income families into the net.

Income tax thresholds will remain frozen until 2028, snatching more of our earnings as wages rise.

Here’s how to fight back.

Capital gains tax is charged on profits when selling assets such as a second home, investment property, business, antiques, jewellery, cryptocurrency or shares held outside of an Isa.

It’s charged at 10 percent for basic rate taxpayers or 18 percent if selling a property (not your home), while higher rate taxpayers pay at 20 percent or 28 percent.

If you hold any stocks (including old privatisation shares) or investment funds outside of an Isa, your gains may be subject to CGT.

Yet they will be free of all CGT inside an Isa, so take this chance to switch them inside the tax wrapper, says Stevie Heafford, tax partner at accountancy group HW Fisher.

You can do this quickly by selling them one day and buying them back the next, a process known as Bed & Isa.

Any gains may be subject to CGT but if you act before April 6, you can use today’s higher £12,300 CGT allowance to bank more of them tax-free.

Married couples and civil partners can pass assets to each other free of tax, which allows them to double up their CGT allowances and bank £24,600 of CGT-free gains in total.

Your Isa allowance is also a great weapon in the battle against Hunt’s dividend tax raid, as it allows you to take all your income from shares and funds tax free.

So again, Bed&Isa any existing income-generating investments and make sure you buy new shares or investment funds inside your £20,000 allowance.

If you don’t fancy investing in shares it is still worth considering putting money into a cash Isa, where all interest is free of tax for life.

READ MORE: Your guide to inheritance tax – from what it is to how to reduce it

Heafford warned: “If you don’t use this year’s £20,000 Isa allowance by the deadline, you’ve lost it for good.”

The Isa tax wrapper does not offer IHT protection. While you can pass on your tax advantages to a spouse or civil partner, on their death the money falls back into their estate for IHT purposes.

However, you can reduce your IHT exposure by making gifts to loved ones before the tax year ends.

Everyone can gift up to £3,000 each year with instant IHT exemption. So you could give someone £3,000 before April 6 and another £3,000 afterwards (that’s £6,000 in total).

Couples could double this to gift a total of £12,000.

Everyone can make further annual IHT-free gifts of up to £250 per person, as well as £5,000 to a child if they’re getting married, or £2,500 to a grandchild or great-grandchild who’se getting wed, and £1,000 to a relative or friend.

Further gifts are known as “potentially exempt transfers” and only fully IHT-free if you live seven more years.

Heafford says Hunt’s decision to scrap the pensions lifetime allowance has given workers a dynamite way of reducing their IHT exposure. “If you can afford to put more into the pension whilst working and claim tax relief, the money will be outside of your estate on death but will still be available during your lifetime if you need it.”

In another change from April 6, the threshold for paying additional rate income tax at 45 percent will be cut from £150,000 to £125,140.

Heafford said: “If you can bring forward any income, that might be a good idea.”

Investing in a pension and claiming tax relief can also help beat the income tax freeze. Or consider salary sacrifice to cut earnings and boost pension.

Whatever you do, act fast as Hunt is about to swoop.


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