Personal taxes have hit a 70-year high as HM Revenue & Customs takes more of our hard-earned money.
With Labour on course to win the next election, the tax burden could get heavier still. So it pays to do whatever you legally can to reduce your exposure.
Capital gains tax (CGT) bills have tripled in a decade to £18 billion, with the latest surge driven by buy-to-let investors offloading properties and private investors racing to use their allowances before Hunt’s latest tax raid kicked in.
Britons now pay more in CGT than they do on stamp duty on property purchases.
HMRC also raked in a record £7.1billion in inheritance tax receipts in the year to March 2023, which is £1billion more than the last tax year.
Many investors overlook dividend tax but even this has become more punitive, increasing the advantages of saving inside the tax-free Isa wrapper.
From April 6, Hunt slashed the threshold at which people start paying CGT on gains from £12,300 to just £6,000.
He will reduce it again to £3,000 from April 2024 and Sean McCann, chartered financial planner at NFU Mutual, said: “This led many buy-to-let landlords to bring forward the sale of the property to benefit from a higher tax-free exemption.”
Landlords are also dumping properties to escape rising mortgage rates, reduced tax breaks and tighter regulation on the sector.
“With the value of the average UK property increasing by 70 percent over the last decade, many are facing substantial CGT bills,” McCann added.
CGT 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 starts at just 10 percent for basic rate taxpayers which rises to 18 percent if selling a property other than a main residence.
Higher rate taxpayers are charged at 20 percent or 28 percent respectively.
If investors hold any stocks (including old privatisation shares) or investment funds outside of an Isa, their gains may be subject to CGT.
The same shares and funds held inside a stocks and shares Isa are free of CGT for life, so take this chance to make the switch, said Stevie Heafford, tax partner at accountancy group HW Fisher.
Many investors who sold shares before the CGT threshold was cut in April will have instantly brought them back inside their £20,000 Isa allowance, a process known as Bed & Isa.
Isas now offer investors another tax benefit, because from April 6 Hunt also cut dividend allowance, which limits the tax-free income investors can earn from shares each year, from £2,000 to £1,000.
It will be cut again in April next year, to a meagre £500.
READ MORE: Britons to pay extra £590 in Jeremy Hunt’s tax raid
Dividend tax can be even more punitive than CGT, as basic rate taxpayers pay 8.75 percent on any income they receive above the annual allowance, while higher rate taxpayers pay 33.75 percent and additional rate taxpayers pay 39.35 percent.
More Britons will become liable to CGT and dividend tax over time due to the reduced thresholds, said Aegon’s pensions director Steven Cameron.
“However, if you invest in shares or investment funds through an Isa or pension instead, all of the dividends you receive from the underlying investments are totally free of dividend tax.”
Inheritance tax remains the most hated UK levy of all, but it is possible to reduce bills.
There are a host of tax planning opportunities, including making gifts to family while still alive.
One little-known option, which involves making gifts to loved ones out of regular income, could potentially allow families to pass on unlimited sums of money.
Many assume trusts are only for the super-rich, but trust planning can help middle income families too.
One of the best ways to reduce exposure is to pay more money into a pension, as this is not subject to IHT on death.
Another tax planning option allowed this family to cut its £3 million inheritance tax bill to zero, using a method most people would never even have considered.
Or read our expert guide to inheritance tax and how to reduce it online. Alternatively, download our free PDF version.
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