All change at The Treasury. A brand-new Chancellor delivers a new Budget. Lloyd French of Delaunay Wealth Management examines what it all means for your financial planning future.
At the risk of stating the completely obvious, things have moved on rapidly since our last blog.
In just a few short weeks, not only do we have a previously unheard-of Chancellor in post at Number 11, we appear to be living almost in a different world. One that’s unprecedented in post-war Britain, and that could change everything we know.
I say could.
On the Coronavirus, I will simply say this: none of us know what our economic and financial future will be; also, uncertainty has a knack of blindsiding us. Here at Delaunay we’ll wait and see, with caution. Uncomfortable episodes in history are just that by definition; in other words, they ended.
Forewarned is forearmed, and if you’d like to discuss your options, we’re just a phone call away on 0345 505 3500.
So, what happened when Rishi Sunak stood up in Parliament to deliver his speech?
A Gigantic Budget
Firstly, we’d like to say that we’re non-partisan. We’re taking an apolitical stance here. This notwithstanding, most if not all commentators viewed the Budget as a robust one, to put it mildly. It seems there’s been a turnaround. Austerity is no more, indeed this is a tax and spend budget with a strong emphasis on buoying up our economy and supporting the NHS in the face of the current pandemic (although the news is moving fast). £40 billion has been added to public spending. An amount of note.
Also, out of interest, the “B” word (Brexit) was mentioned just twice, which surprised many.
Secondly, we’re not accountants, so we’ll highlight the key take-aways from the Budget that focus on our areas of expertise: financial planning, investments and pensions.
The Pension Taper Allowance
A key issue for many of my clients, the pensions taper allowance has at last been addressed.
Currently, higher earners are disincentivised to invest in a pension scheme, and it’s all about tax. Your pension allowance, should you earn over £150,000 for example, is less than £40,000, with the allowance decreasing as your salary rises. This situation has been a bit of a body blow, not least to higher earners in the NHS. But now, there’s more positive news. The Chancellor has revealed plans to raise the point at which the tapered annual allowance kicks in, from £110,000 to £200,000. And, it all starts next month.
Beware. If you have a total income of more than £300,000, the minimum annual allowance will be reduced to £4,000 (down from £10,000) at the same time.
Pensions Tax Relief
Interestingly, no change here. Nothing to report. However…
Entrepreneurs’ Tax Relief
A BIG change. Widely anticipated, indeed promised in the government’s election manifesto as a must-reform issue, Entrepreneurs’ Tax Relief has been slashed dramatically – by 90%, in fact.
Formally a means of enabling a business owner to qualify for Capital Gains Tax relief if they sell shares in their business, the lifetime limit on the relief has been reduced from £10 million to £1 million. A strong reform, then, but not abolished altogether, as had been mooted.
The NIC threshold will rise from £8,632 in the current tax year, to £9,500 in the 2020/21 period. This could save around £100 per year for a typical worker or employee. There are plans to increase the threshold further, to £12,500 – all part of the government’s plans to offer tax cuts to the lower paid.
Tax Efficient Investments
Short and sweet: as expected, there are no changes to the business relief qualification rules also no change to the rules on Venture Capital Trusts, Enterprise Investment Schemes and Seed Enterprise Investment Schemes.
In our opinion, this is encouraging. Helping small, high-growth companies can be good for the investor and supports UK economic growth. But, there’s still a clear-cut, unequivocal warning from us with these types of investments. They are NOT secure, and you MUST seek qualified advice before considering them.
Here at Delaunay, we’re an authority in tax efficient investments, so get in touch if you’d like to know more.
Good news for parents, we think. If you’re saving for your children’s future, you’ll now be able to invest twice as much into a Junior Individual Savings Account than previously. What’s more, you can start saving very soon: 6th April 2020, in fact.
Parents and grandparents will soon be able to save up to £9,000 a year into a JISA, rather than £4,368.
(There’s no change for us grown-ups, though; the limit for 2020/21 will stay at £20,000)
Capital Gains Tax Reporting
If you’re a UK resident and sell your 2nd home, you’ll have just 30 days from completion to tell HMRC and pay any Capital Gains tax you owe. This could include rented property, a home you’ve inherited, or a holiday home.
And, there are penalties if you don’t act quickly. There’s a penalty and interest on what you owe. What’s more, this new reporting legislation applies to non-UK residents with properties here.
There are exceptions, though, such as if you sell your property at a loss, sell it to a spouse or partner, or if a binding contract for the sale was made before 6th April, 2020. Again, contact us for the full picture.
So, an interesting budget. It certainly created waves, but this can only be our views on the headlines. Any questions? We’d be happy to help. Call Delaunay Wealth on 0345 505 3500. Please note that the value of your investment and any income from it may go down as well as up. You may not get back the original amount you invested.
Tax treatment depends on individual circumstances. Both your circumstances and tax rules may be subject to change in the future.
VCT, EIS and SEED schemes are high risk, and not appropriate for everyone.