A Taxing Time Ahead?

Recruitment Agents Beware

The Chancellor’s forthcoming budget statement on 8th July 2015 may not be top of everyone’s summer reading list, but it offers a window of opportunity when it comes to managing your wealth. George Osborne has promised no increases in income tax, national insurance or VAT in the life of this Parliament. Yet while he is under pressure to keep election promises made, Mr Osborne also has to balance the books. So what does this mean for clients looking to manage their wealth? In particular, how can you ensure that any further changes made to the tax system can both minimise any adverse changes in tax rises as well as maximise favourable tax changes as part of your wealth management planning.

One of the key elements of the Government’s ability to improve the public coffers will be to ensure the economy keeps on growing. The Conservative party seems to be committed to Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT) so reliefs available on these vehicles may remain untouched. For high earning investors with a higher tolerance to risk who have utilised their ISA and pension allowances such alternative tax-efficient schemes may be worth a second look.
This will be particularly important for those likely to hit the reduced £1m lifetime allowance figure in April 2016. £1 million may seem a large sum to accumulate, but for those who have made the effort to contribute to their retirement regularly over the years on the basis of a limit that was practically 50% higher in 2012, it’s anything but encouraging. Ros Altman, the new pensions minister, was against this reduction. Will it be implemented?

Nor is it good news for younger clients who are committed to saving more towards retirement. Again, many will hit the limit way before reaching pensionable age, which will see them suffer a 55% tax charge for the sin of saving diligently. To put it in perspective, anyone currently aged 35 or younger in white collar employment who saves towards their pension regularly is likely to breach the £1m limit.

Also, the proposal by the Conservatives to allow up to £1m to be exempt from the value of the family home on death sounds like a big giveaway on the surface. But a look at the detail and you realise this is a combined figure for couples paid for by potentially scrapping additional rate tax relief for those earning over £150,000.
So while we can now enjoy an element of political stability over the next five years, getting the right financial advice to ensure your wealth management strategies can cope with economic and budgetary changes ahead will be essential.