Regardless of your political persuasion, and regardless of your financial situation, a change in government could affect what you take for granted. It is best then, to be prepared for any changes before they come – an especially good idea with Theresa May’s increasingly tenuous minority government, and Jeremy Corbin’s labour numbers surging in the last general election.
Amongst some of Labour’s proposals are the following:
- Higher income tax on those earning over £80,000 a year.
- Wealth taxes, such as a land-value tax replacing council tax, and a rework of inheritance tax bills.
- Potential lowering of the tax relief available for making pension contributions.
- Re-nationalisation of railways, energy and water companies, and Royal Mail.
- Charging VAT on private school fees to fund free primary school meals.
- Abolishment of student tuition fees, and all outstanding student debt.
You might think the above sound like compelling ideas. You might not. Irrespective, the following is some basic advice on how you can minimise any extra costs that may be coming your way.
For starters, if the income tax was to rise, it would be in your best interests to bring forward any bonuses and dividends into the current tax year where possible. It would also be worth considering a transfer of some income-generating assets to your spouse or civil partner if they pay a lower rate of tax than yourself.
Next, while it is still unclear as to the likelihood of Labour’s proposed wealth taxes, you can at least minimise risk with inheritance tax bills by gifting assets to your descendants sooner rather than later – if you live for seven years after they have been gifted then they are completely outside of your estate for inheritance tax purposes. This has the added benefit of reducing your taxable wealth.
As for the current pension contribution allowances, the financial advisor at Hargreaves Lansdown states that these allowances ‘are living on borrowed time, so should be used while still available’. At this moment in time, you can make a maximum annual contribution of £40,000 per tax year, and can carry forward previously unused allowances from the previous 3 tax years. The significant tax breaks included in this allowance mean that basic-rate taxpayers get £100 added to their pension for every £80 they pay, dropping as low as £55 for those on the additional rate of tax.
And finally, school/tuition fees. If VAT is added onto private school fees then it would be beneficial to minimise the total cost you are paying before VAT, so check whether you can get any discounts for paying in advance.
The proposal to abolish tuition fees and all outstanding student debt would mean that if you are planning to avoid your child taking a loan by paying their fees, or if you were planning to pay off your student debt, this could be the equivalent of throwing money down the drain. To avoid this risk, it might be worth holding off on these courses of action for now.
Source: The Sunday Times, “Is it time to Corbyn-proof your finances?”
Images: Wikimedia & Staticflickr