How Labour's October Tax Might Hit Your Finances| ISA| CGT | Pension

Could October 30th be the real financial Halloween? Forget the spooky stuff on the 31st, but what if Labour's new tax plans could drastically change your financial future? We're talking about potential hikes in capital gains tax, changes in the ISA, and also changes in the inheritance tax. With the Halloween Budget on October 30, Labour Chancellor Rachel Reeves is set to unveil tax policies that could significantly impact investors, pensioners, business owners alike. Now, these tax changes have been talked about so much to the point that there's a lot of anxiety, there's a lot of anticipation in the air, and it hasn't been helped by the announcement by the government that they found a 22 billion pound financial black hole in government finances. It means, Mr. Speaker, that we have inherited a projected overspend of 22 billion pounds. How do you feel that everyone is thinking taxes. So everyone, from investors to everyday savers are on edge. The fear is that to plug these said gaps, labor might significantly raise taxes, hitting especially those who are trying to secure their financial future the hardest. Many doctors and healthcare professionals, especially NHS staff, are already feeling the strain from rising inflation. Wage stagnation and the dreaded 60% tax trap are already causing enough financial headaches. So could these new tax plans make things even worse? And what can you do about them? In today's episode, I'll break down how labor's potential tax changes could impact your financial well being, focusing on three main areas capital gains tax, ISA and pensions. I'll also share practical steps to consider, so stick around for the full breakdown. Hey everyone. If you're new here, I'm Dr. Andy Egwim from moneywisedoctor.com I founded Money Wise Doctor to help doctors and healthcare professionals make smarter financial decisions. Today we're going to dive into the upcoming changes that could affect us not just in 2024, but in 2025 and beyond. So if you're ready, let's just go straight in and pick them one by one. I'm happy to get your questions in the comments. If you have anything you'd like to clarify. I'm happy to answer them in the comments as well. And if you're in a hurry, please use the timestamps below to jump to the sections that matter most to you. Now, let's go straight for number one, capital gains tax increases. So, capital gains tax or cgt, there's a potential that they could be rising. If you don't already know, CGT is a tax you pay on the profit from selling an Asset. For instance, if you sell a property or stocks and you make money, you pay CGT. Currently, basic rate taxpayers pay 10% on assets they sell or 18% on residential property. While higher rate taxpayers pay 20% or 24% when they sell residential property. However, labor has hinted that they might increase CGT rates to align with income tax. So we're talking 40%. So potentially if CGT could go up to as high as 39%. Example, let's say you bought a rental property at £200,000 five years ago and is now worth £300,000. Under the current rules, as a higher rate taxpayer, you'll probably be paying around £10,000 CGT. Let's not do so much public math, but if it goes up to 39%, you could be paying as much as 39,000. So that's quite a bit. Now it's not just property stocks are affected too. If you've been investing in the stock market and decide to sell your shares after seeing significant gains, you face this same tax increase. Now let's look at number two, our beloved ISA. So what's the threat to ISAs now? Labor might introduce a cap of £100,000 or whatever on the ISAs. While nothing is confirmed, the mere mention of this has already sparked a lot of anxiety among savers and investors. If you are using your ISA as part of your wealth building strategy, you could find yourself restricted losing one of the best tools for tax free growth. Imagine this for instance. Let's say some people have been taking full advantage of their ISA allowance for several years, let's say 10 years. So let's say you've been taking advantage of your £20,000 and it's 9,000 for Junior Isa. If you've been doing this for 10 years, you could already have about £200,000 or a bit more, not even considering the investment growth that could push it higher. So we've already seen some ISA millennials in the country already in the UK. But if Labour caps the ISAs or maybe introduces some sort of capital gains tax on the growth of the isa, let's say above a million pounds, that might also restrict your ability to grow your ISA tax free. Number three is Business Asset Disposal Relief. Now let's look at an important one for business Business Asset Disposal Relief. I'll give you an example. Recently e consult a health tech company we all know, especially if a JP was sold to Houma and why the price of sale was not made public is estimated to be about 40 to 50 million pounds. So this is where the badr comes in. Formerly known as entrepreneur's relief, this relief allows business owners to pay just 10% of capital gains tax on the first £1 million in gains when selling their business. But this was 10 million before, but now it's 1 million relief. But labor could scrap this all together. For example, if you're a doctor selling your dental practice or your dentist selling your dental practice, or a health tech startup, you manage to sell it for 2 million quid. The first million is 10% tax you have to pay or even scrap. This day, probably you might see yourself paying above on your startup or business that you sell. I know, I know it sounds like a lot of money, but remember, they might have been building it for 20 years or thereabouts. Anyway, let's look at number four. It affects more of US pension contributions and income tax relief. This is one of the most anticipated changes is a curtailment of income tax relief on pension contributions. So right now, if you're a higher rate taxpayer, you're benefiting the most from this tax relief. But if labor reduces the tax relief or introduces a flat rate system, it could go down from 40% relief to 30% or even less. What does this mean? Currently if you're a higher rate taxpayer, you benefit from 40% tax relief when saving into your pension. But under Labor's potential new rules, this could drop to 30% or even a bit lower. It means that you lose out on saving a significant chunk of your pension. You know, tax that you'd have been taxed on your pension because when you put in money, you get that tax relief. For example, if you are saving 10,000 into your pension, you currently benefit from let's say £4,000 in tax relief if you're a higher rate taxpayer because it's 40%. Now if labor implements a flat rate relief of 30%, you only receive £3,000 in relief. And this might not sound like a huge difference, but over the years, think about 20, 30 years of working. It can add up quite a bit, especially for high income earners. Alright, number five, the inheritance tax changes. Right now, pensions fall outside your estate for inheritance tax purposes and it allows you to pass it on tax free to your family. But labor might bring the pensions into the scope of inheritance tax or reduce tax free pension withdrawals. This would be a significant blow to those planning to leave some wealth to future generations. So these are a few potential changes. Remember, nothing is confirmed till October 30. But what can you do even with all this? One, don't panic. While these proposals might be worrying, it's essential not to make any rash financial decisions before the full details are known, and we'll be telling you when it's known. Most changes likely will come into effect maybe by April 2025. Now number two, review your investments and your pensions. If you are thinking of selling property or stocks, now might be the time to do it before any changes take place. Again, not financial advice, Consider consulting a professional Financial advisor specialist if you are concerned about potential tax changes, this might be a good time to speak to a specialist financial advisor who specializes in dealing with doctors and healthcare professionals and understand issues that affect us directly. But what's really important? You need to stay informed, keep an eye on the news subscribe to the channel Knowledge is power. Especially uncertain times now. Basically in conclusion, the UK tax landscape could be changing drastically, but with careful planning you can protect your financial future. Be sure to subscribe for more updates on labor tax plans and other personal finance topics that could help you. And if you're thinking about pensions or something that might be helpful, check out my video on SIPP and NHS Pension on the channel. Also, if you like a free summary of all these tax changes when it's announced, you want a free summary and a breakdown that can help you understand it clearly and what it means for you. If you head over to moneywisedoctor.com subscribe then that will give you access to my free weekly newsletter where I will be summarizing all these changes and breaking it down to the way that it actually affects you as a doctor or healthcare professional. Again, it's moneywisedoctor.com subscribe and you can get the links in the description and in the comments as well. Well, it's been lovely to speak with you again this weekend, but just to be clear, this video is not professional financial advice. If you need to consult a financial advisor who specializes in working with doctors and healthcare professionals, head over to moneywisedoctor.com to arrange a free appointment with one of our vetted specialists. Alright then, if you got any questions or if you've got any comments on what do you think that might happen with these new tax changes, I'd like to hear it in the comments below. If there's something you didn't understand, you want some clarification or even if it's not related to this particular video, but it's something related to your personal finance as a doctor healthcare professional, drop me a comment and I'll be in the comments in the YouTube section replying alright then, Bye bye.