Wendy Spires takes you through a quick budget update after Chancellor George Osborne’s 17 March Budget announcements.
In his 17 March Budget announcements, Chancellor George Osborne unveiled a slew of tax breaks for savers, first-time property buyers and taxpayers at several income levels. However, the Budget also held a number of cuts and rule changes which will raise serious questions for affluent investors.
One of the biggest changes was the reduction in the lifetime pension contribution allowance from £1,250,000 to £1,000,000, meaning that those who have already built up significant pots will have to start urgently seeking alternative retirement savings routes (as will those looking to save larger sums).
Osborne did not increase the Inheritance Tax threshold as many had hoped. In fact, the Budget confirmed that several strategies for transferring wealth tax-efficiently are under threat – such as the settlement of various trusts in one day with each benefitting from their own nil-rate tax band under the Rysaffe principle, and the use of Deeds of Variation to amend wills.
The regime for Entrepreneurs’ Relief was tightened up significantly, while there was also no respite for non-doms who choose to pay tax on a remittance basis. Where once non-doms could settle their tax bill with the Revenue for £50,000 for 17 out of 20 years, from 6 April 2015 this will be hiked to £90,000.
Financial advisers and their clients are now busily digesting the detail of the Budget announcements – particularly the implications of a renewed crackdown on tax avoidance and evasion which is hoped to raise an additional £3.1bn in revenues. While the tabled abolition of annual tax returns was welcomed, wealth managers are warning that “digital tax accounts” may bring their own woes.