With the announcement of the emergency budget on July 8th, there are expected to be many changes to a number of financial legislations. One expected change is to the way tax free allowance is structured. Pre-election, the Conservative manifesto included details about how high earners’ tax relief would be decreased in order to fund an inheritance tax allowance increase of up to £1 million.
The move to decrease tax free allowance for high earners would mean that more of their income would be subject to tax. For those earning £150,000 or more per year that pay 45% rate of income tax, this could result in a significant increase in the amount of tax paid.
Some financial advisers are suggesting that high earners take advantage of tax-free pension contributions while they are still able to. Depositing a large lump sum before July 8th would allow the highest rate of pensions tax relief before any cuts take place. Pensions have also taken a hit recently, as at the last budget it was announced that the maximum you could save into a pension over a lifetime would be reduced from £1.25 million to £1 million.
We took a look at some of the other implications in the election aftermath in an earlier news post. Take a look at what is happening to mortgage and interest rates here.