Tax: 4 ways your financial adviser can help you manage a changing tax liability

On 30 October, chancellor Rachel Reeves delivered the new Labour government’s first Budget. A much-anticipated event, the Budget was expected to shake up the UK’s fiscal landscape, and it did just that.

If you haven’t read our full report of the changes announced in the 2024 Autumn Budget, you can do so on our news page.

One area of particular focus was tax, with the chancellor saying her announcements would raise £40 billion in tax revenue to pad the public purse. Capital Gains Tax (CGT) and Inheritance Tax (IHT) were most affected, along with reliefs for business owners and shareholders being reduced in some areas.

Remember, though, that although some of the Budget changes might affect your wealth, there’s no need to panic or make sudden decisions.

Your financial adviser is there to help you manage any changes to your tax liability. Here are four ways we can do so in light of the Budget.

1. Looking at the big picture to avoid panic-driven decisions

When one specific aspect of your wealth is drawn into focus by a policy change, you could fall victim to “tunnel vision” and lose sight of the big picture. This mindset may lead to ill-informed decision-making.

For instance, Reeves announced in the Budget that the rate of CGT for the disposal of non-property assets would rise with immediate effect, to be brought in line with property rates.

So, from 30 October onwards:

• Basic-rate taxpayers will pay 18% CGT on non-property gains, up from 10%.
• Higher- and additional-rate taxpayers will pay 24% CGT on non-property gains, up from 20%.

This increase might have caused you to worry. If you’re set to sell business shares or liquidate non-ISA shares in retirement, you could now be facing a higher CGT bill than you anticipated.

For example, if your gains from the sale of an asset were £50,000, and you still had your full Annual Exempt Amount of £3,000 intact, the taxable sum would be £47,000. As a higher-rate taxpayer, you may previously have paid CGT at a rate of 20%, meaning your bill would have been £9,400. After the Budget, your bill may have risen to £11,280.

In light of this tax levy, your financial adviser would consider the big picture, looking at this specific tax increase in the context of your overall life plan.

For instance, alongside your rising CGT bill, they may consider:

• Your Income Tax and Dividend Tax liabilities
• The proposed timeline of future asset disposal plans
• The value of your taxable assets and how much they may increase over time
• Any losses from existing and previous tax years that you could offset against gains
• How to maximise your tax-efficient income, such as Individual Savings Accounts (ISA) returns
• Whether the CGT increase will actually affect your long-term goals.

It’s easy to see the headlines and panic, but looking at the big picture and planning accordingly might temper your worry.

2. Preparing for policy changes before they come into practice

While some of the Budget announcements were brought in with immediate effect, several others are set to be enacted in the coming months and years.

Crucially, this means there’s time to understand how the changes might affect you, and prepare for them if possible.

For example, the chancellor announced that from April 2027 onwards, private pensions will be included in a person’s estate for IHT purposes. At the time of writing, they do not – meaning that if you passed away tomorrow, your pensions could be bequeathed to the next generation tax-free.

Reading about this change to IHT rules, you could worry that your loved ones will be left with an even higher IHT bill than you’d anticipated.

While your financial adviser may not be able to completely remove this possibility, they could speak to you about tweaking your financial plan to accommodate this new legislation. We’ll use advanced cashflow planning software to model different scenarios, enabling you to make an informed decision about where you save and invest your wealth and how much your beneficiaries could inherit as a result.

Preparing ahead of time could mean you and your family are less harshly affected by any fiscal policy changes.

3. Balancing your short-term needs with your long-term goals

We often speak to our clients about the importance of keeping long-term goals in mind. But if you’re unhappy or uncomfortable in the here and now, especially where your tax bill is concerned, it’s crucial that we help you address this too.

Moreover, your financial adviser will carefully consider your short-term needs and long-term goals, aiming to strike an ideal balance between the two.

We can help with your short-term requirements, including:

• Ensuring your earnings are as tax-efficient as possible
• Helping you claim the maximum tax relief on your pension contributions
• Keeping you informed about policy changes that are set to come in soon
• Giving you the confidence to spend your hard-earned money on important experiences, such as family holidays.

Each of these short-term actions will feed into your long-term goals. Keeping your tax liability to a minimum today could mean you have a larger retirement savings pot to draw from later, to name but one example.

4. Taking your family’s circumstances into account, as well as your own

While individual financial planning is helpful in itself, where tax is concerned, it could be worth exploring how other close relatives’ finances might come into play too.

For example, your spouse or civil partner may have earnings, pensions, investments, and financial goals of their own – all of which could inform your own tax planning strategy. In the previously discussed case of rising CGT rates, you and your spouse could benefit from the spousal exemption from CGT, strategically transferring assets between you to ensure you’re both gaining the maximum tax efficiency on any gains you make.

And, where IHT is concerned, remember that your spouse or civil partner can inherit your estate IHT-free, as well as inheriting your unused nil-rate bands too. This means you could essentially double the tax efficiency of your estate plan by considering both your tax situations together, rather than creating a purely individual financial plan.

Get in touch

If you feel worried or overwhelmed by the Budget announcements, you are not alone. Working with an independent professional may put your mind at ease and keep you focused on your goals.

Email info@chancellorfinancial.co.uk, or call 01204 526 846 to speak to an adviser.

If you’re already a client here at Chancellor, contact your personal financial adviser to discuss any of the content you’ve read in this article.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change. The Financial Conduct Authority does not regulate estate planning, cashflow planning, or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.