Financial adviser reaction to the Budget

An increase in CGT rates from 10% to 18% (an 80% rise for basic rate taxpayers) and from 20% to 24% (a 20% increase for higher rate taxpayers) will significantly impact investors because investors will retain less of their profits when selling appreciated assets. For example, a gain of £10,000 previously taxed at 10% would incur £1,000 in CGT; under the new rate of 18%, the tax due would rise to £1,800. This reduces net gains and lowers the effective return on investments, which could influence the appeal of capital growth-focused investments. For both basic and higher-rate taxpayers, these CGT rate increases can slow the rate of wealth accumulation, as investors will be left with less of their profits to reinvest.

Rachel won’t be on many client’s Christmas card list this year following todays budget and it is understandable why. Not only are these some major changes but their imminent introduction means little time to plan.. Those who planned for these changes and got their house in order before today appear to be right.

Business owners and businesses have been hit hard today. It remains to be seen how the government are attempting to promote a growth agenda whislt simaltaneously making it very difficult for businesses to employ people with higher wages, higher national insurance costs and more emloyees brought into auto enrolment and therefore pension costs. For a 50 employee business this could mean a potential 10% increase in employee costs into a slowing economy.
It was also a bad day for pension savers and planners alike, bringing pensions into inheritence tax will effect many and mean a rethink of a lot of financial planning.

The Chancellor's budget speech felt less like breaking news and more like a greatest-hits compilation of leaked policies from the past few weeks. Despite this taking the sting out of what could have been a seismic shift in the tax landscape, the government are likely to be pleased that any sense of déjà vu came from premature policy speculation rather than a Truss-style tribute act. In aggregate, the £40 billion tax-raising plan demonstrates a clear commitment to fiscal prudence, however, this comes against a backdrop of a tepid growth outlook, illustrated by the OBR’s long-term forecasts. Furthermore, the Chancellor's budgetary measures effectively transfer a significant fiscal burden to the corporate sector, allowing the government to uphold its manifesto pledges. This is likely to foster a challenging environment for businesses, dampening business investment and job creation in the short term, particularly for small and medium-sized firms that form the backbone of the UK economy.