Hunt has declared tax war on investors, as he slashes the threshold for paying tax on capital gains from £12,000 to just £6,000 from April 6.
From April 2024, he will slash the again CGT threshold again, to just £3,000. Any gains above that will be taxable.
In a double swoop, Hunt is also taking the knife to the dividend allowance. That currently allows investors to take £2,000 a year in dividends as income each year, free of tax.
From April 6, just over one month away, that will halve to just £1,000 a year, then halve again to £500 in April 2024.
Yet all capital gains and dividend income will still be completely tax free if you invest inside your annual Stocks and Shares Isa allowance.
I have been urging everyone to use as much of their £20,000 ISA allowance as they can before this year’s deadline on midnight April 5.
While most people can’t afford to put away anywhere near that much, others will use their full allowance.
Once they’ve done that, they should recruit their children and grandchildren in the battle against HM Treasury, because the under-18s get an Isa allowance too.
It is called the Junior Isa, sometimes shortened to JISA, and allows family and friends to invest up to £9,000 a year on their behalf.
All their returns are free of income tax and CGT for life. Jeremy Hunt can’t touch them.
Like the £20,000 adult Isa allowance, the Junior Isa is issued on a “use it or lose it” basis, so families should act before the April 5 deadline. After that they have lost this year’s allowance for good (but get another one next financial year).
The Junior Isa is more valuable than ever as the tax burden hits a 70-year high while children face an uncertain financial future, said James Hart, investment director at Witan Investment Trust.
Students who started their degree in 2021/22 are expected to graduate with debts of £45,800, official figures show, while the average first-time buyer property deposit last year in England was a hefty £62,470.
“With average rents around £1,200 per month and twice that in London, saving a deposit when you’re young is increasingly difficult and a little help can go a long way,” Hart said.
Families are faced can choose between a Junior Cash Isa or Junior Stocks and Shares Isa.
Most opt for the safety of cash but stocks and shares are likely to make their money work harder over periods as long as 18 years.
READ MORE: JISA: Investing for your child could make them a future ‘millionaire’
Someone who had used the full junior Isa allowance every year since 2011 would have put away £63,000 in total.
This would have grown to £72,000 in the average Junior Cash Isa but £86,000 in a Junior Stocks and Shares Isa tracking the FTSE All-Share, according to a study by Scottish Friendly and the Centre for Economics and Business Research.
That’s an extra £14,000. Well worth having.
Scottish Friendly commercial director Alexander Manas said the difference in returns is “compelling”. “Stocks and shares also offer more inflation protection than cash.”
Junior Isas must be set up by a parent or guardian, but anyone can contribute.
They are simple and easy to set up through an online investment platform such as AJ Bell, Bestinvest, Chelsea Financial Services, Hargreaves Lansdown or Interactive Investor.
The money belongs to the child when they turn 18, at which point it automatically rolls over into an adult Isa, retaining all of its tax advantages.
Some question the wisdom of handing a teenage a large sum of money but Rachel Storey, independent financial adviser at Fairstone, said. “Educate your children about money from a young age so they will use their funds wisely when they get their hands on them.”
Your kids can help your family beat Jeremy Hunt’s tax grab today, without lifting a finger themselves. They will be handsomely rewarded when their Junior Isas mature.
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