Lloyd French of Delaunay Wealth Management offers you some informed speculation on what the new year could have in store for us from a financial planning point of view.
It’s a new year and, we hope, an exciting new decade full of possibilities. As an experienced financial planning specialist, I hope that 2020 brings you and your family everything you wish for, not least, of course, your financial goals.
Welcome to the New Year
January is a new start and many of us are making commitments for 2020. Have you made any yet? It’s most certainly the time to make plans and in our opinion, a good opportunity for some positive financial resolve and purpose. Resolutions, in other words. And, crucially, to commit and act on them without delay. Why? Because time is short.
The tax return deadline of 31st January will be upon us very soon, swiftly followed by the tax year end on 5th April. So, now is the right moment to review your position with a financial advisor. Whilst we all pay tax to fund our public services and are happy to do so, a specialist could help you to reduce your tax burden, as well as offering advice on tax-efficient investments.
(We’d be happy to help, by the way, so feel free to contact us on 0345 505 3500).
And There’s Been an Election
There’s something else to bear in mind. The election results.
We also have a newly invigorated and substantially reinforced (in terms of MPs) Conservative government. Through a return to power with 360 seats out of 600, our UK government now has its biggest parliamentary majority since the late 1980s, indeed since Margaret Thatcher was re-elected in 1987.
Whilst remaining strictly apolitical, here at Delaunay Wealth this strength in numbers could deliver greater stability and more certainty over the next five years. Uncertainty is at an end, at least for now. A government with a substantial majority has leverage, whatever side they’re on.
Two things we know, then: We will be leaving the European Union – without a doubt. Getting “Brexit done”, in other words. And, there’s going to be a Budget on March 11th. This will be Sajid Javid’s first as Chancellor and I’m sure he will want to make an impact. What’s going to be in the Budget? I don’t know, I’m afraid. Nobody does, but I know what I would like to see raised; or at least presented to the House for legislation discussion and amendment.
Strictly in my opinion, of course, a few pieces existing legislation could do with re-examining.
Pensions Taper Allowance
Introduced in 2016, in a nutshell, the taper allowance appears to deliver a degree of disincentive for higher earners looking to contribute to a pension.
It works like this:
Normally, your pension contributions can reduce your taxable income. Why? Because the government actively encourages people to save for their later years through tax relief. Make payments into a pension scheme and your reward is a lower tax bill through an annual allowance. More cash in your bank.
However, this annual allowance gradually reduces the tax allowance for those on higher incomes. If you earn more than £150,000 your pension allowance will be decreased below £40,000. Earn more than £210,000 and the annual allowance sky dives to £10,000 a year.
This retrospective pension charge has affected NHS doctors and other workers in key, high profile occupations, not least because anecdotally, they’re turning down work or refusing overtime. Fewer essential expert resources for us, and bad news for them, as earning more means losing their pension tax relief allowance.
The thing is, the government pledged to have a look at this situation within its first 30 days in power and that’s well, now, really.
The other issue I’m expecting to see in the Chancellor’s March 11th Budget is:
Capital Gains Tax, especially Entrepreneur’s Relief
A review of Entrepreneur’s Relief was promised in the Conservatives’ election manifesto, so it could be a shoo-in on Budget day. Along with a firm commitment not to raise Income Tax, VAT or National Insurance – all good – was a clear indication that this form of tax relief will be reformed, although probably not scrapped entirely.
So, could this be the time to remind you to speak to financial planning expert right now if you’re considering selling your business? There could be, repeat could be, some tax changes coming our way.
Introduced in 2008, Entrepreneurs’ Relief enables a business owner potentially to qualify for special CGT relief if they sell shares within their business. You would qualify for this as a sole trader selling part or all of the business and currently, entrepreneurs pay a preferential 10% on the first £10m of gains. This is worth a lot of money, of course. Bear in mind, too, that this relief also applies even if you are a higher rate taxpayer.
Any gains above £10m are taxed at the full rate of 20%.
Changes in 2018/2019 tightened up the rules of qualification and the length of time shares needed to be held, but there could be further changes on the way. Maybe even a doubling down on the rules. Of course, this could take some time (there is the small matter of leaving the EU after all), but if you’re a business owner, I’d advise you to seek advice sooner rather than later.
In my opinion, Capital Gains Tax is a complicated subject in general, so anything that streamlines these tax issues can only be good. I, for one am intrigued to see what the Chancellor plans for us.
None of us has a crystal ball but one thing we do know: the government has a lot to do. As do we all!
Has this article raised questions in your mind? Don’t sit there wondering, here at Delaunay Wealth we’d be very pleased to hear from you.