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UK lawyers representing wealthy clients are reporting the busiest run-up to a Budget in decades as they manage a rush of activity ahead of some potentially significant tax changes next week.
Lawyers acting for high-net-worth individuals have reported a huge influx of enquiries in recent weeks, leading to working practices more akin to corporate lawyers, as they field out-of-hours calls, work weekends and have a series of late nights to manage the deluge.
Such dynamics are more commonly seen in the M&A space, where lawyers are forced to work all-nighters to meet tight deadlines. Patrick Harney, a private client lawyer at Mishcon de Reya, said the frenzy of activity had meant limiting calls for prospective clients to 30 minutes to cope.
“This is the busiest pre-Budget run-up since I started practising in the UK in 2003,” said Harney.
Concerns are mounting over potential changes to inheritance and capital gains taxes in chancellor Rachel Reeves’s Budget on October 30, with a number of wealthy clients already disposing of assets in preparation, lawyers said.
“We’re in the storm before the storm,” said Christopher Groves, a private client and tax partner at Withers. “Our clients are getting slightly feverish from all the speculation. Every time they open a newspaper there is a new story about what changes the Budget will bring and they want to know how it will affect them and what they should do to anticipate it.”
Reeves is considering raising capital gains tax rates, with former Treasury sources telling the Financial Times last week that any rises were more likely to fall on the sale of shares, rather than second homes. Capital gains tax applies to the money made on the sale of assets including businesses, shares, and property that is not the main home, as well as carried interest.
People familiar with the chancellor’s plans have also said Reeves is considering making deep reforms to inheritance tax. Changes could restrict inheritance tax reliefs, now of up to 100 per cent, allowed on business assets, shares in unlisted companies, or farmland. They could also make assets given away during an individual’s lifetime more liable to tax.
The possible changes have led some wealthy clients in areas such as farming to consider transferring assets to children or relatives ahead of time, to shore up their security for the future, lawyers said, as families attempt to ensure assets are not wiped out by a future tax bill.
“We have seen a flurry of anxiety queries, questions, worries,” said Sally Ashford, head of the UK private client team at Charles Russell Speechlys. “We have clients who were thinking of doing things and those actions have been accelerated.”
John Barnett, partner at law firm Burges Salmon, said he had covered more than 30 Budgets over his career. In his experience, Budgets after a change of government have always been more charged.
“Of the three changes of government I’ve seen in 1997, 2010 and now, this one has definitely been the biggest Budget” in terms of reaction from clients, he said. His average working day had increased by a couple of hours, he added. “Nervousness [from clients] has been the single biggest reaction and that is causing a lot more workload.”
One cause for concern is how quickly any changes might be introduced. While some new measures may take effect from the next tax year, there is precedent for them to come into effect immediately. In 2010, then chancellor George Osborne raised capital gains tax for higher rate taxpayers from midnight on Budget day, a move that some lawyers were caught out by.
Barnett said the busy period was expected to continue after the Budget, with his diary “almost full already” for client meetings after November 1. Across the legal and tax industry, he said he was aware employers were restricting holiday requests between January and April, when the new tax year begins.
“Although the tax tail should never wag the commercial dog, we are advising clients . . . on the merits in some cases of triggering [some] disposals now, to bank the current capital gains tax rates,” said Harney.
Even if some changes are not immediate, the UK is already halfway through the tax year. This leaves less time for clients to make big decisions about how to respond to changes.
“We’re busy at the moment and expecting it to get busier,” said Groves.
