THE SPRING BUDGET 2023

Dominic Thomas
March 2023  •  10 min read

Pension reforms of sorts…

If you are under 75 and have a pension, today is a better day than yesterday. You may breathe a sigh of relief; the Chancellor has done something to directly benefit you. As with all Chancellors, there is of course some politics at play. Whatever your view of the rabble at the House of Commons, we finally have a Chancellor who seems to both understand maths and has an ability for some long-term thinking as well as valuing the concept of financial independence in his Spring Budget 2023.

As a reminder, it was the Blair Government who introduced the Finance Act 2004 which ushered in new pension rules from April 6th 2006 known as A-Day and termed “Pension Simplification”. The basic premise was to simplify pension funding, enabling anyone to make payments and get tax relief, restricted by a maximum annual contribution allowance and a lifetime allowance for the value of your pensions, be they final salary or investment based. It sounded so simple, something akin to the battery level on your mobile phone.

Next month, “pension simplification” turns 18 years old. Simple is certainly not a term that anyone would consider in the same breath as pension rules. A veritable smorgasbord of metrics are needed to monitor if you fall foul of the rules.

A-DAY TURNS ADULT

Today though, Mr Hunt has abolished the Lifetime Allowance, a welcome and grown up but unexpected move (it had been hinted that it would return to the level at which the Conservative Government inherited it at £1.8m. No, it’s abolished, completely! The Lifetime Allowance, which is something everyone had to assess pension benefits against will be gone from 6th April 2023. Do not retire before then – or more accurately do not crystallise any pension until then.

ANNUAL ALLOWANCE – UP BUT STILL TAPERED

He has not however returned the Annual Allowance to the 2010 level of £255,000 but has increased it from £40,000 to £60,000. In addition, the Tapered Annual Allowance has not been scrapped, but increased from £240,000 to £260,000 from 6 April 2023. The threshold test at income of £200,000 has not been altered. In theory therefore the new standard annual allowance of £60,000 will still reduce by £0.50 for each £1 over £260,000 but stopped at £360,000 when you will get the minimum maximum annual allowance of £10,000.

By way of example, someone with income of £300,000 would be £40,000 over the £260,000 threshold and thus see the annual allowance reduce from £60,000 to £40,000.

Those of you that have taken income from a personal pension (not a defined benefit/final salary pension) will be able to continue towards a pension under the Money Purchase Annual Allowance (MPAA) which is being increased from £4,000 back to £10,000. I understand this will double up as the minimum maximum (if you see what I mean) that anyone with income over £360,000 can also contribute (gross).

NEGATIVE TURNS POSITIVE

Medics (and a few others) that on occasion have a negative pension value for the year will now be able to offset this, something that was not possible previously.

25% TAX FREE CASH IS GOING FOR BIG PENSION POTS

There is a slight “fly in the ointment”. Under pension rules tax free cash is capped at 25% of the fund value, buried in page 100 of the Budget is the statement that advisers understand but most investors do not. “The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter”. In other words, the tax free cash lump sum (PCLS) link is to be broken. 25% of the current lifetime allowance is £268,275 and this is therefore being retained, meaning that whether your pension fund is more than this, you cannot withdraw more than £268,275 as a tax free lump sum. In plain a pension fund of £2m does not produce tax free cash of £500,000 (25%) but £268,275.

One other “minor” point is that those with Primary, Enhanced, Fixed or even Individual Protection from 2006, 2012 (max £450,000), 2014 (max £375,000) and 2016 (max £312,500). Therefore some people will have a higher tax free cash entitlement than the new limit of £268,275).

ISAs, JISAs, VCTs, EIS, SEIS

All as previously.

INCOME TAX, CORPORATION TAX, CAPITAL GAINS TAX, INHERITANCE TAX

As previously announced for 2023/24.

On occasion, Budget plans get revised (remember the glove puppet of a PM?) so there is a possibility that after a little more thought, pressure and checking, some of the points in the Budget might need a tweak, but in general this is a rarity.

If you have questions, that I have the realistic possibility of answering (not “where is Cloddach Bridge?” which gets a sum for refurbishment…. which I imagine is one of those times we may remark, “what, a million pounds?” (actually £1.5m) is either a lot or a little, that old price and value thing… much like the criticism that will inevitably be made of the abolition of the lifetime allowance, which is, from my perspective of working with you, a very good thing indeed.

THE SPRING BUDGET 20232025-01-27T17:01:00+00:00

The November budget

The November budget

The problem of having a deadline for publication is that life tends to throw up some new important information just at the wrong time. The chaos of the ‘mini-budget’ resulted in a new Prime Minister and Chancellor. The Budget on 17th November was set to herald tax rises. So, what has been announced?

NOVEMBER – INCOME TAX

Tax thresholds have been frozen, save the additional rate of tax threshold, which now begins sooner, meaning that more people will pay 45% tax, starting at £125,140 instead of £150,000. What this means in practice for someone now brought into additional rate (earning £150,000) is that they pay 5% more income tax on their earnings above £125,140.  If you earn £150,000 you would pay £1,243 more income tax as a result of this change, (£11,187 as opposed to £9,944) effectively £103.58 a month more. Whilst politicians talk of short-term pain, the projections show this measure for 5 years.

NOVEMBER – CAPITAL GAINS TAX

Capital Gains allowances have been cut substantially, reducing from £12,500 to £6,000 from April 2023 and then to £3,000 from April 2024.  Trusts have a CGT allowance of half the personal allowance. So realising gains this tax year will be more effective than in future years.

As a reminder, this is the permitted gains on assets being sold with a 0% tax rate before being taxed at 10% or 20%, unless that asset is a second property in which case its 18% or 28%. So if you are a landlord, sell before April 5th to maximise your allowances.

I had expected the rates of tax to increase in line with income taxes rather than the allowance being altered and mostly scrapped entirely. In any event, capital gains tax allowance reductions makes your annual ISA, Pension, VCT, EIS allowances all even more attractive, sheltering funds from CGT in different ways.

NOVEMBER- DIVIDENDS

The Dividend allowance has also been slashed. This will mostly impact those with a small business whereby family members or staff can have a share of profits (dividends) tax free. The first £2,000 of dividends are currently tax free, this will reduce to £1,000 from the new tax year and then £500 in the next ..

NOVEMBER – PENSIONS

It would seem that there are no changes, which is frankly a bit of a surprise. The annual allowance remains at £40,000 unless you have income over £200,000 when a reduced (tapered) allowance would apply. The Lifetime Allowance has remained in place. If you are an NHS employee, I cannot find anything in the 70 page statement to help you with your annual allowance problems and there is nothing about the tapered annual allowance. So, sadly, more senior doctors will likely reduce their NHS hours or otherwise face tax charges on income that they have not had. We can help crunch the numbers, but if anyone is in a position to ‘get it’, Mr Hunt is but seems to have chosen not to.

NOVEMBER – STATE PENSIONS

If you are receiving your State Pension, it’s going to increase by 10% in April. If you haven’t started taking yours, well you are also likely to have to wait until you are much older to get one. Everyone knows this is a political ‘hot potato’ and the younger generations are unlikely to receive a State Pension until at least 68 (and this will probably be increased in the announcement in early 2023).

NOVEMBER – FEELING FROZEN?

You are going to need to ‘let it go’ … that is – hopes of seeing the end of frozen allowances ending any time soon. The personal allowance, slice of basic rate and higher rate tax tiers were all frozen anyway, but the deep freeze has been extended by two further years. Due to inflation and rising salaries, this will in itself raise more tax. This is part of what critics call ‘stealth taxes’ – the sort you don’t really register (much like inflation eroding your cash) – you only tend to notice after a few years of going backwards.

The Energy Price Guarantee will be maintained through the Winter, limiting typical energy bills to £2,500, this will increase to £3,000 from April. It is generally expected that energy prices will remain high for the next 12 months. To be blunt, nobody knows because it all rather depends on the Russians. One point to note is that the energy savings you may be making now will likely continue as the Government intend to reduce energy consumption by 15% by the end of the decade. To put that into perspective, that’s about the same as making your use of energy in 10 months last a year.

PROPERTY

The British obsession with houses continues to be supported by Government policy. The tax when buying property (Stamp Duty Land Tax) was reduced in September doubling the first tier of SDLT with a 0% tax rate from £125,000 to £250,000. For First Time Buyers this is extended from £300,000 to £425,000. These measures will end on 31st March 2025. If you are going to move or buy your first home and want to benefit from this fully, do so before March 2025.

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 November budget2023-12-01T12:12:41+00:00

THE AUTUMN BUDGET 2021

TODAY’S BLOG

THE AUTUMN BUDGET 2021

In terms of your personal finance, not a lot has changed. Indeed, most of the announcements merely confirmed previous announcements, such is the way of our politicians. As a reminder, the next tax year begins on 6th April 2022. The main changes for most are really for those that receive dividends or pay National Insurance

iNCOME TAX RATE ON DIVIDENDS 2022/23 2021/22 (NOW)
Basic rate taxpayer 8.75% 7.50%
Higher rate taxpayer 33.75% 32.50%
Additional rate taxpayer 39.45% 38.10%
Rate for Trusts 39.35% 38.10%

National Insurance for employers increases from 13.8% to 15.05% which basically makes it more expensive to employ people. Employees will also pay rather more at the main rate, rising from 12% to 13.25% and then at the upper or higher rate increased from 2% to 3.25%. Remember the thing about National Insurance is that there is a threshold for the main rate after which you simply pay a flat, reduced rate (currently 2% but increasing to 3.25%). The self-employed main rate increases from 9% to 10.25%. Self-employed people do not fully enjoy the same benefits for their NI payments.

MAIN ALLOWANCES

For those of you using your pensions, the annual allowance remains at £40,000 but if you have begun drawing income from investment-based pensions it is restricted to £4,000 the delightfully named “Money Purchase Annual Allowance” or MPAA. The Lifetime Allowance (the total value of your pensions permitted before excess charges) remains frozen as previously indicated at £1,073,100. This is equivalent to a pension income of £53,655.

ISA and JISA limits remain as they were (£20,000 and £9,000) which are fairly substantial allowances but indicate a “kick the can down the road” policy of Government worrying about tax in the future. Capital Gains Tax (CGT) allowances and rates remain as they are (which is daft).

If you own a second property or inherit one, the capital gains rate and requirement for payment are important to understand. However, one small improvement is that you now have 60 days to pay the liability rather than 30 (with immediate effect). I imagine one of Rishi’s friends was offloading and was worried about an extra charge (surely not!).

As for inheritance, the nil rate remains at £325,000 per person and those with children inheriting the family home the residential nil rate band adds a further £175,000. However, this is tapered when an estate is worth more than £2m.

In short, for all the bluff and thunder and 200 pages, not much is in it for you and I. Remember – death and taxes.

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

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The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

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GET IN TOUCH

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The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

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THE AUTUMN BUDGET 20212025-01-21T16:33:57+00:00

THE BUDGET 3 MARCH 2021

TODAY’S BLOG

THE BUDGET 03 MARCH 2021

The House of Commons was unusually civil during the Chancellors Budget Statement largely because hardly anyone was there due to social distancing and making the task rather easy to identify who is behaving like a spoiled child. Normally the Speaker has a harder job. As for the Budget – well, it’s a good job I am not a betting man.

The Chancellor believes that support over the pandemic will run to £407bn in various forms. This needs to be repaid if future generations are not to be saddled with debt forever, thereby hampering how future Governments can help them.

I did warn that taxes would rise, I thought capital gains tax would be the most obvious tax to increase. It has not. The only actual increased tax rate is Corporation Tax, which impacts business owners running profitable businesses (with profits over £250,000). Corporation tax will rise from 19% to 25% – that’s an increase of 31%. It may surprise you to learn that only 10% of businesses claim to make profits over £250,000.

Almost everything else stayed the same – but staying the same really means changing. Of course, this knock-on effect means reduced profit to share out in the larger businesses (like those you invest in via a fund) so returns may be dampened – but then this is simply a UK issue and most of your equity holdings are not in the UK now (your portfolio is global).

SOLOMONS IFA FROZEN ALLOWANCE BUDGET

THE SAME DOES NOT MEAN NO CHANGE

Pensions, Capital Gains, Inheritance tax all remain unchanged, which means that as incomes or the values of assets rise, the excess taxes begin to hurt rather more.

Those approaching retirement have the spectre of a 5-year freeze of the Lifetime Allowance at £1,073,100. Anything above this sees the excess taxed at 55% – so more likely. How much and how you can contribute to pensions is also frozen, as it is for ISAs and Junior ISAs. These are probably the “nice to have” problems if you are running a business that is struggling or have an income that has fallen dramatically due to the pandemic.

Your Personal allowance (income you can have at 0% tax rate) rises by £70 on 6th April to £12,570 but then stays at that level for 5 years. Higher rate and Additional Rate tiers also remain frozen. What this really means is that if your income rises due to inflation or promotion etc, you will pay more tax.

The most notable help to younger generations is the Apprentice Scheme and the re-opening of 95% mortgages by lenders, who have been given Government guarantees. There may be some window dressing here, a borrower will still be made to jump through a variety of hoops to prove that they can become an owner (or more accurately, a borrower) rather than a renter, with a 5% deposit. Those that have taken advantage of the reduce Stamp Duty ending in March, have a little longer to complete their purchase.

If you are asking me what I would have done differently, (you aren’t) well there is a very long list and most of it involves simplifying pensions and tax rates. Complexity enables some to thrive and others to become rather entangled. HMRC are due to have a whopping £180m spent on further technology to help ensure you report your taxes correctly with fairly dire consequences for those that do not. I do hope that the track and trace lot are not “awarded” the HMRC technology contract.

DETAIL IS A DEVIL

Politicians rely on our short-term memories, they must do otherwise so few would ever be re-elected. When you cut through the words it is best to look at the numbers. These are some key forecasts that I have pulled from the Budget Statement (which you can see here).

SOLOMONS IFA BLOG BUDGET ASSUMPTIONS

How you view life will likely influence how you select data from the table above (which is all lifted directly from the Budget) I have only shown the year on year changes as a percentage and drawn attention to some of the data (of which there is a lot!). Long story short, we will be paying more income tax. The Chancellor seems to be expecting unemployment  to increase by 500,000 over the next 2 years before reducing, but still above current levels. Inheritance tax receipts peak in the coming tax year perhaps reflecting the consequences of the fatalities from the virus.

The property market looks predicted to return to normality shortly, but really picking up next year. Council tax looks likely to increase rather faster than inflation. Fuel duties will begin to rise, and oddly over the next 12 months, once hopefully this is over, duties from alcohol actually fall in 2021/22 (which I think is odd unless you have all been knocking back the booze over the last year or so more than normal with a plan to cut back).  Air Passenger duty has rather obviously collapsed and will likely return to pre-pandemic levels in 4-5 years time, that’s quite a slow recovery.

Corporation tax will really bite in 3-4 years time. Business rates also begin to pick up, which when combined with loan repayments and more VAT, I imagine that some business owners may be looking at cost reductions. There may well be “pent up demand” and a good supply of labour, the Chancellor is understandably encouraging investment in growth, through new technology and digital business combined with Apprenticeships. It (business growth and development) is certainly what needs to happen, but whether it will remains to be seen.

Every Budget has lots of assumptions about the future, but you will be paying more tax, so use the allowances you can.

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

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

THE BUDGET 3 MARCH 20212025-01-21T16:33:57+00:00

DOCTOR, DOCTOR… IN THE TELEGRAPH

TODAY’S BLOG

DOCTOR DOCTOR… IN THE TELEGRAPH

You may have come across my details in a piece in The Telegraph on Monday 10 September 2018 by financial journalist Laura Miller. Laura outlines a problem that is being observed in hospitals around the UK, in that some doctors are in the ludicrous position of effectively being forced to reduce their available hours due to the additional taxes that they will suffer for additional income. This has the inevitable potential to create longer waiting lists.

Before we go any further, let me say that Laura asked me to check some sums from a Consultant doctor who was making the point about the annual allowance excess taxes. I have made no secret of the fact that I believe the tapered annual allowance is an utterly stupid Government policy. It isn’t the first and of course will not be the last.

THIS IS GOING TO HURT

My only concern is that some may interpret the information as “greedy doctors worry about tax and so work less”. So I wish to make one point crystal clear. I have advised medics for over 25 years. I have met hundreds of them. I have never, NEVER, not even once met one that was motivated by money as a career choice. The early career of a junior doctor is particularly traumatic and frankly the NHS and Department of Health should be ashamed of the working pressures and timetables that they put them under. If you need any convincing, simply have a look at Adam Kay’s Book – “This is Going To Hurt”. Yet the system continues, because it is always under strain and there are not enough doctors to do the work within “normal” working hours or shifts.

DOCTORS EARNINGS

It is true that some doctors can earn very good incomes. The £10,000 annual allowance only applies to those with income over £210,000 – which is a lot of money by most standards. However, these are people that are highly skilled and at the top of their profession, have given way more than their pound of flesh and are constantly scrutinised for errors and lambasted by politicians and media whenever it suits. For the record, this is not Laura’s intent.

The rather ludicrous rules also impact any doctor whose pension income improves by more than £2,106 in a year. This too would push them over the standard annual allowance and potentially suffer excess tax charges. The tax charge is treated effectively as income tax at the highest rate, despite the fact that the pension has not actually been paid to them, conceivably might never be paid to them if they were to die before retirement. In essence a tax on future, yet to be received income. This sort of rise in pension benefit could come from something as innocuous as moving up the grades, or perhaps for impressive work in the form of Clinical Excellence Awards – or even returning to a full-time post.

HEARING PROBLEM

This is all to do with the way in which the Annual Allowance is calculated for those in final salary schemes. I wrote to the previous Chancellor, twice, without reply on this subject when he presided over the introduced rules. Perhaps Laura will have more success.

Suffice to say this is a complex piece of pension planning, a headache that neither the doctor, nor the NHS really should have to waste time on. Yet my advice is to all doctors is to request a Pension Annual Savings Statement as well as their Total Rewards Statement and ensure all payslips are carefully retained – as well as information about any and every form of income they receive from all possible sources. This is more unpaid work, increased stress and bureaucracy to satisfy some utterly numpty thinking at HM Treasury…. Nothing new in that though is there.

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

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

DOCTOR, DOCTOR… IN THE TELEGRAPH2023-12-01T12:17:52+00:00

Conference Season

Conference Season

It is conference season and I my diary is suitably full of my selection of those that I believe merit attention. I’m not attending any of the political conferences and have recently returned from what might be best described as the Premier League of Financial Planners Conference – the annual CISI conference at Celtic Manor.

Yes Minister

Whilst being a non-political conference, clearly insight from the occasional politician or a former one can be valuable. Step forward Steve Webb, who was a LibDem MP and the Minister for Pensions in the Coalition Government, back in the day when politics offered some semblance of common sense.

The Autumn Budget – 22 November 2017

Whilst understandably providing various caveats to his talk, Mr Webb made clear that given the Queen’s Speech, the current Government have essentially given themselves a 2-year timeframe.

 

Not Enough Hours in the Day

He explained that due to the workings of Parliament, this means about 40 weeks in the year that is given over to Parliamentary work. However, 1 day a week is set aside for the Opposition to make their case and another is for MPs to actually work with their own constituents. Given the amount of time that Brexit will consume, there is precious little likelihood that anything significant will change, unless it is populist, garnering all-party support within the available 120 days a year.

Why Tax Rules Are Daft

Aas tax legislation does not have to go via the House of Lords, unlike other acts (for approval or sense check) much can be altered quickly, even with a tiny majority. He made the point that it is precisely because tax legislation bypasses the House of Lords, that so much of it is so complex and poorly thought through. So that in mind, what could the Government possibly muck around with?

What you can pay in

The Annual Allowance – could be reduced further from the current £40,000, despite acknowledging the complexity of the Tapered Annual Allowance, he thought it more likely that this would be extended rather than abolished, perhaps bringing it in for those earning £100,000 rather than £150,000.

What you can get out

Whilst the Lifetime Allowance has already been thrashed to £1m and is meant to now be linked to inflationary increases, he said that cutting it further is an option as “it passes the Daily Mail test – where people think a £1m pension fund is a lot”. He made the point that the Treasury appears to hate pensions (see all recent changes over the last 15 years) but love ISAs, for which they attempt to invent a new one almost each year now.

Employer’s beware

Whilst he thought it unlikely, he also proposed that the Government could apply employers National Insurance contributions to their pension contributions, which would effectively end salary sacrifice arrangements. He also felt it improbable that the tax-free cash lump sum from pensions would end or be reduced, due to the complexity it would create for those that have had, are having or due to have it and rules are difficult to apply retrospectively.

No F-Bombs

Without a single interruption from anyone handing in a P45 or the stage falling apart, the room of delegates was impressed with his delivery and rationale, but sanguine about the prospect of further pension meddling. Everyone I spoke with conceded that ISAs certainly seem to be the favoured investment vehicle for the Treasury as they only give up future tax revenue, rather than current tax revenues. However, reliance on any future Government to maintain promises about ISAs seems probably unwise.

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

Conference Season2025-01-27T17:01:45+00:00

Talking Money…. again

Talking Money… again

As you will have gathered from the plethora of adverts in the weekend papers and advertising hoardings everywhere, the tax year is coming to a close. This means it is your last chance to use up your 2016/17 ISA allowance of £15,240 or perhaps a Junior ISA for those young enough.

This tax year has had many unwelcome changes, most significantly the pension tapered annual allowance, which has reduced the annual allowance (normally capped at £40,000) to a £10,000. This applies to anyone with “adjusted income” over £150,000. But that doesn’t make you “safe” if you don’ earn £150,000. As the annual allowance is £40,000, the maths starts at £110,000 of income. Pension contributions paid are added to income, indeed any income, be it rent, dividends or interest are all counted. So many may well find that they have exceeded the annual allowance.

Deliberate Complexity

Yes, the Government could have made things easier, but why bother when there are so many willing voters who will forget the hassle at the ballot box. In fact, Mr Hammond, the Chancellor has had two opportunities to abolish this utterly ludicrous rule in either in his Autumn Statement or his Budget last week. There are tax penalties and charges if this is exceeded and you don’t have any unused relief from any of the three previous tax years 2015/16, 2014/15 and 2013/14. Pensions have the ability to go back 3 tax years if you exceed your annual allowance.

Shrinking heads?

To provide a little more context – ten years ago, the annual allowance was £215,000 in 2006/17, it rose each tax year to £255,000 by 2010/11. It was then slashed to £50,000 for 2011/12 and remained at that level until 2014/15 when it became £40,000. Today in 2016/17 it is likely to be £10,000 for many high earners.

Of course the Government knows what they are doing, by encouraging us all to save for our retirement and financial independence…. I expect that we will soon hear “lessons will be learned”. Oh and no, this is not fake news, its just unwelcome news.

Clients will be receiving a printed copy of Talking money this week, which has some more facts.

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

Talking Money…. again2025-01-27T16:08:19+00:00

2017 Budget

2017 Budget

The 2017 Budget from the Chancellor Philip Hammond will take place this Wednesday. In practice, few are expecting him to deliver anything significant. He has already publicly stated that there will be no “spending sprees” which is a rather unhelpful relative term, but would imply that there is unlikely to be a considerable amount of money for sectors that probably need it.

There are lots of things that I wish he would change, but I am sounding rather like a broken or at least well-worn record, that the rules around pensions are more than a little bit daft, but utterly insane – but hey, this is Government policy not common sense.

Pension Insanity

As a brief reminder of the pensions insanity. You are restricted to how much you can pay into a pension each tax year (called the annual allowance). This is currently £40,000 or 100% of your actual earned income, whichever is the lower figure.

The UK has a system where you are penalised if your pension pot exceeds a certain value (now £1million) this is called the Lifetime Allowance. You are also penalised if you earn more than £150,000 and begin to see the reduction of your annual allowance from £40,000 to £10,000. This is called pension taper relief, catchy sounding term isn’t it! Tax penalties are ready and waiting should you mess up, many will – through nothing deliberate, other than earning and income and being a member of a pension scheme, something that one would normally think were good things to do. Just for good measure your pension is valued at the point you “retire” (though in their infinite wisdom this is now called a crystallisation event) and then again at 75 with assessment against the Lifetime Allowance, which may well result in a significant tax payment – or rather it will if you exceed the Lifetime Allowance of the day.

Doctors, Teachers and Measure for Measure

Those that are members of final salary pensions like the NHS, Civil Service or Teachers Pension Schemes – basically anyone that works for a State service, which is likely to benefit us all. You possibly know someone who works within in the NHS or a Teacher, who has had increasingly pressurised workloads, with extended hours and utterly pointless assessments, form filling (for which read, Government department bureaucrats need to measure something, so let’s try this) all simply to justify their non-inflated salaries, which on occasion they have to reapply for…  all because a Government can. Anyway, as these people are clearly coping too well and not leaving in the numbers that Government hoped, they are asked to calculate their annual allowance rather differently and constantly guess if they will overpay for the year, which results in a tax fine that on money that they might not receive when then retire. I am not kidding – this is not fake news.

Hollow Words, Smoke and Mirrors

When Chancellors and Prime Ministers or indeed any politician talks about serving people, one is  always left suspicious as the words are invariably bereft of any action plan or follow through. There are few like the Duke, in Measure for Measure, who survey the detail of the way their citizens are governed. We all plod on regardless because the problems are apparently “just too big to fix” and “we must all have a grown-up debate”… hmm..

If Government was a business it would be in an even worse shape, for failing its customers so frequently and so outrageously. Yet whichever one is elected, they make the same empty promises and simply meddle along, tinkering at the edges hoping that everyone will quickly forget, which they will…

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

2017 Budget2023-12-01T12:18:40+00:00

The Autumn Statement 2016

The Autumn Statement 2016

With a few hours to go Philip Hammond will be delivering his first Autumn statement, perhaps his last too if reports are to be believed that he will scrap them… who knows. In any event here is my quick wish list for the Autumn Statement

My Autumn Statement Wish List

(from a financial services perspective)

Abolish the Lifetime Allowance, which is currently £1m – if you hold more than this in pensions and you haven’t already “protected it” you will suffer an excess charge. Utterly pointless and discourages people from saving for their financial independence. This would also imply scrapping all previous protections.

Abolish Taper Relief – the new rule that has caused a raft of problems for those earning over £150,000 who can end up able to pay less into a pension (and still may suffer a penalty) than can be invested into an ISA. Utter lunacy, creating enormous headache for some.

Abolish Higher Rate Tax Relief – not what you might expect me to say and on the caveat that the two previous points are met. This saves the UK considerable sums, yet continues to offer an incentive to save for a pension.

Abolish Tapered Personal Allowance – either everyone gets one or nobody gets one. At the moment if you earn over £100,000 your personal allowance reduces by 50p for every £1 over £100,000.

Scrap the new Main Residence IHT allowance – just give everyone an allowance of £500,000 and have done with it. What former Chancellor George Osborne created is a shambles of smoke and mirrors.

Re-establish the different systems for Final Salary (Defined Benefits) pension schemes without any annual allowance, restricting total contributions to any pension to a fixed % of income by the employee (it used to be 15%). Vast sums and energy is used by departments in the NHS, Teachers, Local Government etc all creating utterly pointless, time sucking reports about the Annual Allowance and Lifetime Allowance. This is completely unnecessary.

Abolish LISA – another attempt to hit pensions with the high exit charges and daft array of decisions. Scrap this and other utterly pointless versions of an ISA. Have the single ISA allowance of £20,000 invest it however you like.

Stamp Duty – introduced to calm the property market which is now largely locked up with anxiety about Brexit etc. Huge tax take by Government and feels like a mugging. This needs reduced dramatically.

Fair Taxation

Earn it and tax it here. If you or your business generate income here in the UK it should be taxed at UK Corporation tax rates. Take note Google, Starbucks and Mr Green (et al). So all that nonsense for cross transfer pricing must end.

Genuinely Seeking Transparency and Tax Simplification? Have three rates of personal tax 0%, 20%, 40%. Whatever the source (dividends, capital gains, income etc). Huge sums are wasted on preparing numbers for a system that is designed to confuse. People break the rules deliberately or without knowing.

Corporations

Businesses pay corporation tax, this could be the same rates, with different allowances as personal taxation… this might mean busineses would use their revenue to reduce profits, either through inward innovative investments, expenses, employing people or redistributing to shareholders. More innovation creates more value, wealth, jobs….more tax take.

Means-Testing

If you are retired and have an income in excess of say £100,000 you forefeit your State Pension. You also forfeit free travel on public services and also the Winter fuel allowance…. come on, if you have a £100,000 income and don’t work any more, you aren’t going to need it or miss it and a relatively small number of retired people have £100,000 pension.. but really if you are a celeb you can give up your State pension and bus pass.

Landlords

Being a landlord is just like being a business. You have power over where people live. Some vetting is clearly needed (obviously not all landlords are bad). Landlords should have to apply to be a landlord license and register properties and all those living in them. Property has to be inspected every 3 years to ensure it is suitable for real people to live in. The new rules introduced about CGT, Stamp Duty and interest relief need reviewing, fair rents and fair offsets.

Ok, highly unlikely these will happen, but I really think some better ideas from Chancellors are required…

Our APP will be updated by the end of the day with all the relevant changes. It is FREE to have simply search for Solomons Financial Planning on either APP platform. There are loads of free tools and calculators to try out including an expenses tracker.

 

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 Autumn Statement 20162025-01-21T16:34:24+00:00

The Future of Pensions

The Future of Pensions

I am currently at my annual conference in Wales – the Chartered Institute for Securities and Investments (CISI) with whom the IFP – Institute of Financial Planning merged last year. Yesterday we covered a number of valuable topics, but the talk that resonated most with me was from former Pensions Minister MP Steve Webb, who talked about the future of pensions – amongst other things.

I had to admit that my BS radar is usually on hyperdrive when listening to any politician these days, which is probably a sad reflection on me, however I was very impressed by what he had to say, albeit he did not paint a terribly pleasant picture of the future. Of course, only time will tell if his predictions come about and in fairness, he was quick to remind us of the problems with predicting the future, particularly in a climate where since the last general election all of the major political parties have changed their leaders and the country has voted to leave the EU.

Book cover of Yes Minister - A Very Courageous Decision

Play it again Sam…(or Phil)

Webb was clear that changing pensions is pretty difficult and appears to be a low priority to either the Government of Civil Service. He gave an insight into the slow turning wheels of Whitehall, sounding much like an episode from Yes Minister. Given all the change that we have had (State Pension, Auto Enrolment, Pension Freedoms, Annual Allowance Taper, Lifetime Allowance…) he suspects and urges a period of quiet inaction from the Chancellor, Philip Hammond. This is particularly pertinent to those concerned about the loss or reductions of tax relief on pension contributions or changes to the tax free cash entitlement. He made the case that the public and financial planners could not plan ahead in confidence if the rules are changed every year, yet warned at Chancellors are easily tempted by ideas to collect more tax, however short-sighted.

Whilst on the subject of tax he made it clear that the Treasury are naturally inclined to taxing now rather than in the years ahead, so there is a very real pressure to take the view that tax relief reductions in the short-term outweigh the advantages of taxed incomes in the future, so by inference, a system of loss of tax relief and no taxation of pension income is a genuine prospect. He argued that this was evidenced by the Treasury’s love for ISAs and obvious contempt for pensions with the Lifetime Allowance reductions (and associated tax penalties) and the new tapered annual allowance. Personally he would scrap the LTA but retain a cap on annual pension contributions (which I certainly agree with). He did point out that of course putting trust in future Chancellors to honour a commitment not to tax pension income in the future required a high degree of faith, which  deliberately provoked some mirth from the audience.

Turning to Brexit, he simply outlined his view that interest rates are likely to be very low for a long time, which would place pressure on people to look for better returns than the puny sums they achieve from their savings. He argued that this would likely lead to yet more scams as people fall for yet more illusory promises of high returns. He also warned of the impact on final salary pension schemes which, because of the assets that they hold and the way calculations are performed, would have larger deficits in their pensions (due to low interest rates) probably leading to some, or perhaps a majority of companies trimming their dividend payments.. which in turn makes the task of achieving investment income harder still.

He seemed to have little regard for our regulator of whom he said was “not fit for purpose” and thought the new LISA was perhaps the most badly constructed investment idea for years. If you follow me on social media, you will know my thoughts on this already.

So, whilst Steve Webb found a receptive audience, I was left with the sinking feeling that there was little hope for common sense to return to the Treasury… but who knows… we all get to find out in a few weeks time for the Autumn Statement.

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 Future of Pensions2025-01-21T15:03:17+00:00
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