The Budget 2016

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The Budget 2016

There’s nothing like the Budget to divide people along political lines, I shall refrain from making political statements. All Chancellors perform a merry dance taking from one pocket to give to another, the current Chancellor is no exception (indeed there are none).

Lifetime ISA & Pensions

The stand out issues are that there has been no attack on pension tax relief, as leaked following leaked rumours that it would be. However a new Lifetime ISA looks a lot like a pension – with an effective tax relief of 20% but maintaining the ability to access the money before retirement (before 55). This is much like Individual Retirement Accounts in the US and something that many have called for over the years. The problem is simply that a pension has the advantage of being a long-term lock away pot, there for your retirement. Enabling people to access funds earlier is designed to help homebuyers. On the surface this is a good thing, in practice access to money does not deal with the problem of over-priced housing, if anything it is likely to make things worse (think about it).

That said the ISA allowance is going to rise to £20,000 – which is good news for investors seeking tax-free growth. If I were a cynic I might suggest that these two issues are connected – the prospect of a lifetime allowance for ISAs could be introduced for all. So reading between the lines, the direction of travel seems to be to have 20% tax relief, accessible funds, but restrictions on the value of the pot…. we shall see in the fullness of time.

The Chancellor also appears to have tidied up some of the older tax rules about inherited pensions. When somone dies before 75 with a pension in drawdown, there is no tax to pay by the beneficiaries, after 75 the proceeds are taxed at the recipients marginal rate of tax (which could be 0% or up to 45%).

Pension Advice

The Money Advice Service (funded by levies on financial advisers and pension companies) is to be scrapped, it isn’t working and the name itself is misleading (it’s not advice, but information). I along with many others was peeved about the advertising which suggested a return to the lie that financial advice is free – it never has been and never will be. Given that this was paid for by levy, it felt rather like the biting the hand that feeds. In any event, go-faster stripe paint at the ready… there will be changes (hmm… plenty of opportunity to get some consultants in to test new names, design a logo that will inevitably be less than satisfactory).

Employers that pay for pension advice to employees can currently claim £150 per head without it becoming a benefit in kind (and taxable on the employee) this is being raised to £500 per head. I wonder what might happen…

Capital Gains Tax

The rate of tax payable on capital gains is to be reduced to 10% and 20% (from 18% and 28%) and further suggests a more streamlined approach to taxation, where income taxes and other taxes seem to be at similar rates. I would welcome this as it moves towards a more genuine tax simplification and reduces the number of tax rates, making life easier for planning effectively. The new CGT rates come into effect from 6th April 2016… which will help those lucky enough to nurse some investment gains of late.

Personal Tax

The personal allowance is increasing to £11,000 from 6th April and to £11,500 from 6th April 2017. The amount of income you can earn before the 40% tax rate begins has also been raised. This will not help anyone earning more than £100,000 at which point the personal allowance begins to reduce by £1 for every £2 of income over £100,000.

Small Businesses

Corporation tax is due to fall further, this is a tax tool designed to help encourage enterprise and I think we all welcome actions to stop businesses legally evading tax through transfer pricing etc – the Starbucks or Google loophole looks like one that may be closing…. we shall see.

Small businesses also look set to benefit from rates being cut – which of course is very welcome, its a very odd tax. Business owners do not get to vote for their local authority unlike council taxpayers and many find the costs punitive. Most will be receiving demands this month for the next year and be very pleased at the prospect of a reduction in 12 months time (if I have correctly understood when it will be introduced).

Other stuff… the Budget will be dissected in the media, you will possibly be bored with it already. Of course its important, but the issues invariably are about attempting to make the bad news look good and the good news look “absolutely fabulous” (all Chancellors, all parties). These things tend to come out in the wash… can you remember the Budget from 2011 or 2012? probably not…

Solomons APP

All the changes will hopefully be updated on our APP by the end of the evening. Do let me know how you are getting on with the APP – its full of useful calculators and tools… but only if you use them. Its free to download and use – so do tell others. Don’t forget it works on iphone, ipad and Android.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

The Budget 2016Dominic2025-01-27T17:02:28+00:00

Estates: Your Will online forever

You may not be aware that the Government has now made it possible to search for Wills online. So once you are gone, your last Will and testament is available for anyone to see, should they wish to. Essentially it is nothing more than a searchable database which enables anyone to pay £10 to obtain an electronic copy of historic Wills, assuming the system works, you will receive your copy within about 10 days. It is free to search, but the Will itself costs £10.

It is estimated that there are over 41 million Wills and Grants of Probate on the database, which are compiled from 1858 onwards for England and Wales. I’m reminded of the film “Waking Ned Devine” which is a comedy about a man who wins the lottery but dies from shock, to collect his winnings, he has to be alive, leaving his community to concoct some creative solutions.

Implications

There will be some people who certainly won’t relish the prospect of their Will being published online – perhaps a few celebrities or even Royalty. Remember that for some people a Will reveals the state of family relationships at the point the Will was made.

HMRC better informed?

Perhaps the more important point about a Will or Grant of Probate is that assets are valued and those that are inherited ought to be more visible. This essentially provides a money trail for HMRC to follow. Remember evading tax is illegal, but with this approach it really ought to be the case that HMRC are able to now close in on those that don’t declare sufficient assets in their estate.

There are also implications for capital gains tax too – if you inherit an asset, then unless you sell it, or gift it, there is reasonable grounds to assume that you still own it. If it disappears from your asset inventory, surely questions would be asked which have a knock on effect for prospect of unpaid capital gains tax and perhaps even income tax (if the asset generated income). In short, anyone that isn’t being crystal clear about their assets is likely to come under greater scrutiny.

Other implications also revolve around more “joined up thinking” in that your DVLA licence and car insurance are connected and if you now try to rent or hire a car, you need to input your NI number so that a DVLA permission certificate can be generated. This could be used to link to your investments (pensions and ISAs in particular) but why not your household insurance policy, meant to insure your physical assets.

All in all, I think this will lead to deeper and better information about us all, which will to some extent be publicly available, but more importantly available to HMRC. So make sure you declare your assets and taxes properly. Above all make sure your Will is current and reflects your wishes.

Dominic Thomas
Solomons IFA

Estates: Your Will online foreverDominic2025-01-27T17:04:12+00:00

Those shares you have…

Tax may be due on those shares that you have

As you know, shares are an asset (well they should be) and many provide income in the form of a dividend. This is taxable. Dividends are generally taxed at source at 10% but sadly the tax does not stop there. You have to declare the income so that any additional tax, based upon your other UK income is paid across to HMRC which could be 32.5% or 42.5% depending whether you are a higher rate taxpayer or additional rate (50%) taxpayer. You submit this information via your self assessment return. Anyhow, you may have a few shares that you bought or were “given” many years ago. It is entirely possible that the share is in a company that no longer has the same name. You may have found some old certificates in a dusty old box and assumed that they were worthless.

Checking if “old shares” still exist

It is entirely possible that they are worthless. However it is definitely worth checking first. Despite the advent of technology, tracing shares is a little tricky. Shares listed on the London Stock Exchange are invariably held by one of three registrars. These are Equiniti, Capita and Computershare. If you click on their name it will take you to their website. You can then find out if they look after the company you hold shares in. Alternatively do a search for the original company or check with the LSE, who may be able to provide some assistance (depending on the age of the shares).

Think carefully – CGT may apply

If you decide that the few shares you hold are more hassle than they are worth, please remember that as an asset, they are subject to capital gains tax. In essence you need to know the price you paid for them and the price you sell them for, the difference (the gain or loss) may be taxable. You have a personal capital gains allowance (CGT) which in 2012/13 is £10,600 and would need to be used by 5th April 2013. This allowance means that you can realise gains of £10,600 and pay no tax. The vast majority of people in Britain rarely use their CGT allowance, yet it is highly valuable. The maths is complicated if you have used dividend income to buy more shares automatically, as you will have a series of purchase prices and different “chunks” of shares. You are now in Accountancy dreamland.

There are other options for your shares besides simply selling them, but you should seek personal advice about this as it will depend on the sums involved, your appetite for risk and your requirements for income and capital.

Those shares you have…Dominic2025-02-04T10:56:55+00:00

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