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Dec 04
0

Anti-Greenwashing: New Rules to Help Green Investors

By | Investment Planning

We’ve all seen companies jumping on the environmental bandwagon to make themselves look good. This makes it hard to choose if you want to be sure you’re investing ethically. Which products can you trust? Which claims are genuine?

The Financial Conduct Authority (FCA) has recently brought in new anti-greenwashing rules, however, to ensure companies do not make misleading claims about their sustainable credentials or the investment products they’re offering. The new regulations are aimed at helping customers form decisions based on open and transparent information.

This is key when Environmental, Social, and Governance (ESG) investing is a growing sector. According to the Financial Lives survey by the FCA, 81% of adults would like their investments to do some good as well as provide a financial return. So, financial firms’ marketing information needs to be accurate and not exaggerated.

What are the anti-greenwashing rules?

The anti-greenwashing rules were enacted on 31 May 2024 and apply to all FCA-regulated firms. They cover communications with UK clients and the promotion of financial products and services within the UK.

The overarching aim is to protect consumers by ensuring the sustainable products and services they are sold are accurately described.

Under the new rule, all authorised firms must ensure any sustainability claims in their marketing material are clear, fair and unambiguous. Facts must be accurate and verifiable.

Information needs to abide by the three Cs:

  • Correct and substantiated – if firms are claiming an investment product is ‘green’, they need to be able to back it up with evidence. A fund promoted as ‘fossil fuel-free’ should not hold investments in companies using fossil fuels. Vague terms like ‘sustainable’ or ‘eco-friendly’ should be avoided as they are hard to prove.
  • Clear and presented in a way that can be understood – firms should tailor communications to their target audiences and avoid technical jargon for individuals who are not familiar with industry terms. Visuals and language should not create misleading impressions of environmental friendliness.
  • Complete with no information omitted or hidden – firms should provide a full picture, including both positive and negative aspects of their products or services. If a bond fund supports both sustainable projects and fossil-fuel efficiency improvements, missing out on the latter could be misleading.
  • Comparisons to other products are fair and meaningful – firms must explain any comparisons to help customers make informed decisions. They should not cherry-pick information about their own or comparable products and services.

Previous examples of greenwashing

Tackling greenwashing has become necessary because, in the past, companies have been found to misrepresent environmental benefits.

A company might have claimed that the money raised from a green bond was being used to fund renewable energy projects when it wasn’t. Or a company might have issued a sustainability-linked bond with targets that didn’t require the company to reduce its emissions below a certain level. Or they might have issued a green bond to fund technology improvements while the improvements extended the life of oil refineries.

A wider package of legislation

The anti-greenwashing rule introduced in May was part of a whole package of legislation. On 31 July 2024, the Sustainability Disclosure Requirements regime also came into effect. This enables UK-based fund managers to use product labels to help consumers better understand what the term is being used for.

Under the new FCA rules, asset managers won’t be able to use self-styled claims but will have to choose one of four specific fund labels:

  • ‘Sustainability Focus’
  • ‘Sustainability Improvers’
  • ‘Sustainability Impact’
  • ‘Sustainability Mixed Goals’

The labels have been created to end vague and potentially misleading references to the environmental, social, and governance (ESG) impact of funds. In the past, some funds labelled ‘ESG’ were found to be invested in industries such as fossil fuels, tobacco, and fast fashion.

In fact, it is thought that more than 40% of investment funds in the EU using ESG or sustainability-related labels may be required to change their names or sell assets to comply with the new anti-greenwashing rules.

ESG funds using broad phrases like ‘green’, ‘environmental,” or “climate” will be required to meet investment thresholds by having at least 80% of their assets in investments that meet suitable sustainability characteristics.

They will also need to follow the exclusion criteria for Paris Aligned Benchmarks (PABs), meaning funds will have to collect data to show they’re not exposed to any assets involved in tobacco or controversial weapons and that fossil fuel-related activities are below a certain threshold.

Naming and marketing rules are also scheduled to come into effect from 2 Dec 24.

The consequences of not complying

Investment banks found guilty of greenwashing could face significant fines, legal costs and damage to their reputation. They may also have to offer remediation to customers, who have been mislead by their statements.

It’s important that they start to demonstrate transparency regarding their sustainability and build trust with investors.

The future

The new FCA regulations are designed to:

  • Help customers understand what their money is being used for
  • Improve trust in investment products
  • Ensure that a firm’s environmental claims are backed up with real evidence

This should mean that in the future, investors can believe what they read about sustainable investment options. They should be able to expect clear and detailed information about the environmental or social impact of their investments rather than just vague, unsubstantiated claims.

The more stringent requirements will promote accountability among firms, encourage transparency and tackle greenwashing across the sustainable investment industry. This, in turn, will help investors to make more informed investment decisions in line with their values.

Oct 31
0

The Autumn Statement 2024

By | Financial Planning

There had been much speculation about this budget. Finally, Rachel Reeves—the UK’s first female Chancellor—delivered her plan for the UK economy on 30 October 2024.

The budget includes tax rises and key commitments on borrowing and spending. So, what are the highlights, and how do they affect you?

The Economy

  • Chancellor Reeves confirmed that the UK economy faces a £22bn “black hole”, requiring £40bn in tax rises.
  • CPI inflation is forecast to rise by 2.5% this year. Over the next five years, the annual forecast is 2.6%, 2.3%, 2.1%, 2.1% and 2%, respectively.
  • GDP could rise to 2% next year, but the OBR argues this will just be a “temporary boost”, falling to 1.8% and 1.5% in 2026 and 2027, respectively.
  • £11.8bn of compensation has been set aside for victims of the infected blood scandal, and £1.8bn for victims of the Post Office Horizon scandal.
  • From 2024-25 onwards, total departmental spending will grow by 1.7% in real terms.
  • Next year, the core schools budget will rise by £2.3bn, and £6.7bn of capital investment will be committed to efforts such as rebuilding 500 schools.
  • Another £2.9bn will be committed to defence and £1.3bn more to local government. The day-to-day NHS budget will get a £22.6bn increase, with £3.1bn more for investment.
  • £70bn would be set aside for investment and building new infrastructure from the National Wealth Fund.

Taxes

  • The lower rate of Capital Gains Tax (CGT) has gone up from 10% to 18%. For Higher Rate taxpayers, the rates have now increased from 20% to 24%.
  • CGT rates on the disposal of residential property will remain at 18% and 24%.
  • The inheritance tax (IHT) threshold freeze will be extended by two more years until 2030.
  • The stamp duty surcharge for second homes has increased from 3% to 5%.
  • Taxes on draught drinks will fall, with a 1.7% cut on alcohol duty.
  • Air passenger duty on private jets will rise by 50%.
  • Agricultural Property Relief and Business Property Relief will change in April 2026. The first £1m of combined assets will be IHT-free. Above this threshold, IHT will apply at 50% relief (an effective rate of 20%).
  • The non-dom tax regime will be abolished on 6 April 2025 and replaced with a new, residence-based scheme.

Salaries and Wages

  • The Low Pay Commission’s recommendation to increase the National Living Wage by 6.7% to £12.21 an hour will be accepted.
  • The maximum Carers Allowance of £151 per week will be raised to the equivalent of 16 hours at the National Living Wage per week – i.e. an additional £45.
  • The Employment Allowance has been raised from £5,000 to £10,500.
  • The freeze on income tax thresholds will expire in 2028-29 and will increase in line with inflation after that.

Benefits & Personal Finance

  • Single bus fares will now be capped at £3 per journey instead of £2.
  • Fuel duty has been frozen until 2026, so there will be no tax rises on petrol and diesel.
  • ISA limits will remain unchanged until 5 April 2030.
  • The Household Support Fund and Discretionary Housing Payments have been extended until March 2026 to help those struggling with living costs.
  • New rules are arriving for those who claim Universal Credit (UC) and need to repay benefits debts to the government. A new Fair Repayment Rate will cap any repayments at 15% of your UC standard allowance.
  • The Help to Save scheme has been extended until April 2027. Anyone who works (earning at least £1) and claims UC will be able to access it.

Pensions

  • The basic and new State Pensions will be raised by 4.1% in 2025-26. For 12m pensioners, this should amount to an extra £470 next year.
  • Pensions will be brought into an individual’s taxable estate (for IHT) from April 2027.
  • The Pension Credit Standard Minimum Guarantee will also rise by 4.1%.
  • Overseas pension transfers to the European Economic Area (EEA) or Gibraltar will no longer enjoy special tax treatment but will need to pay the usual 25% charge.

Business

  • Employers’ National Insurance (NI) will rise by 1.2%, to 15%, from April 2025.
  • The Secondary Threshold (the level of an employee’s salary when NI needs to be paid) will also be lowered from £9,100 per year to £5,000.
  • The Employment allowance will also rise from £5,000 to £10,500.
  • Business Asset Disposal Relief will stay at 10% in 2024, but rise to 14% in April 2025. It will then go up again to 18% from 2026-27.
  • The retail, hospitality and leisure industry will get 40% relief on business rates in 2025-26, up to a limit of £110,000 per business.
  • The “windfall tax” (Energy Profits Levy) on oil and gas companies will rise to 38%, expiring in March 2030. These firms will also have their 29% investment allowance removed.

How Will You Be Affected?

Those earning the National Living Wage can look forward to an above-inflation pay rise next April. The same applies to recipients of the basic and new State Pensions. With additional spending pledged to local government, schools and the NHS, citizens can hold out a bit more optimism for improved public services.

Higher earners and investors may be less happy about the Autumn Statement. The increase in CGT rates will make it harder to generate returns outside of tax-efficient “vehicles”, such as ISAs. Estate planning will become more restricted as pensions are brought into taxpayers’ estates in 2027. Many landlords already face great pressure on their portfolios after years of increasing interest rates and the loss of tax allowances. The 2% rise in stamp duty – together with the new rates arriving in March 2025 – will add further challenges.

The budget also leaves several questions unanswered. In particular, how will pensioners be affected by the continuing freeze of income tax rates until April 2028? Current forecasts show that if the policy is left unchanged, this will bring the full new State Pension into the 20% Basic Rate in the coming years.

Conclusion

This budget once again shows the importance of waiting for the Autumn Statement rather than trying to second-guess it. Certain predictions were vindicated, such as the increase in CGT rates and increased NI for employers.

However, CGT rates were not equalised with rates for income tax (as they were in the 1980s under Nigel Lawson). Few also predicted that the Employment Allowance would also rise from £5,000 to £10,500, effectively shielding many small businesses from the tax rise.

Critics argue that the Autumn Statement will damage living standards and make it harder for investors to generate returns and pass down their wealth. Others claim that the tax rises and slow GDP growth will be compensated as the NHS and public services receive extra money.

What is not in doubt is that this budget will have a big impact on financial planning over the coming years. Please speak with an adviser to discuss how this affects your goals and strategy.

Sep 24
5

5 Tax Tips to Help Your Grandchildren

By | Tax Planning

As a grandparent, you’re no doubt keen to spoil your grandchildren. You’ll slip them a bag of sweets, buy them an ice cream or give them the latest ‘must-have’ item on their birthday or Christmas list.

But what can you do to support them financially in the long term? And what measures are available that will also benefit you?

We look at five key ways to give the gift of financial independence while mitigating your tax bill.

1. Inheritance tax exemptions

You can pass some of your wealth to your grandchildren by making gifts. Currently, you can give a total of £3000 each tax year (known as your annual exemption), without it being added to the value of your estate. This can be to one individual or split among several. And if you don’t spend all of your allowance in one tax year, it can be carried over to the next.

But it’s important to be aware of the inheritance tax rules to avoid a tax charge. Once your annual exemption is used up, you need to consider the seven-year rule which means any gift you’ve given within seven years of your death would be subject to inheritance tax at 40% (although on a taper relief scale after three years).

You can also give unlimited gifts of £250 per year under the small gift allowance, provided you haven’t used your annual exemption on the same person.

And if there’s a wedding coming up in the family, as a grandparent, you can give up to £2,500 to the bride or groom tax-free. You can combine this with your annual exemption but not the small gift allowance.

The other allowance that’s often overlooked is ‘gifts from income’. This enables you to make regular tax-free payments to another individual to help with living costs, such as rent, provided the money comes from your regular monthly income, not your savings, and doesn’t affect your lifestyle.

2. Cash savings

You may have decided to help your grandchild by starting a savings account in their name to help them buy their first car or home.

There’s usually no tax to pay on children’s accounts, although if a child gets more than £100 in interest from money given by a parent, HMRC would need to be told. This is because the interest would count towards the parent’s Personal Savings Allowance (PSA), (£1000 in the 2024/25 tax year for a basic-rate taxpayer). Any interest above their PSA would be liable for the marginal rate of Income Tax.

The good news is that the £100 limit doesn’t apply to money given by grandparents, relatives or friends. And although the threshold isn’t relevant here, it underlines the value of tax-free wrappers, which we’re about to come onto.

3. Junior ISA allowances

It’s worth encouraging your grandchild to make full use of their Junior ISA allowance (JISA) as it’s a tax-efficient way of saving and investing for the long term.

In the 2024/25 tax year, an individual can put up to £9000 in a JISA and it’s tax-free.

Your grandchild can either have a Cash JISA and Stocks and Share JISA or a combination of both. Anyone can pay into a JISA (including grandparents!) but they can only be opened by a parent or guardian.

Once they’re 16, your grandchild can manage their own savings and on reaching 18 they can access the funds.

4. Lifetime ISA for adult grandchildren

Times have been tough for young adults trying to find their way, especially with the cost of living crisis, so you may be keen to help your adult grandchildren get on the property ladder.

One way to do this, if they’re between 18 and 39, is to encourage them to open a Lifetime ISA (LISA) and give them money to pay into it. These accounts are designed for young adults looking to buy their first home or make a start on their retirement savings and they offer the same tax advantage as other ISAs.

Your grandchild can put up to £4000 a year into a cash LISA or a Stocks and Shares LISA. Or they can choose a combination of both. They just need to make their first payment before they’re 40 but can keep contributing until they’re 50. The LISA limit of £4000 a year does count as part of their annual ISA limit, currently £20,000.

This type of account makes a tax-efficient option as the government offers a 25% bonus (up to a maximum of £1000) on top of any LISA contributions. So, if your grandchild can put in the full £4000 in any tax year, this is topped up to £5000. They’re essentially getting an extra £1000 for free. And your gift will go even further.

It’s worth pointing out that if your grandchild withdraws the money before they’re 60 for any reason other than buying their first home, they will face a 25% withdrawal charge.

5. Tax relief on third-party pension contributions

Taking their pension may seem a long way off for your grandchildren, but the earlier they start to build their pot, the greater the growth can be. And as a grandparent, you can make contributions to a Junior Personal Pension (Junior PPP) for them at any age – right from the day they’re born.

Like the JISA, a Junior PPP needs to be opened and managed by a parent or legal guardian until the child is 18 but anyone can pay into one on their behalf. Your grandchild will be able to access the money you’ve added to their Junior PPP once they’re 55 (57 in 2028).

You’re also enabling them to benefit from tax relief, valid on third-party contributions. The Junior PPP allowance is £3600 for the 2024/25 tax year, so you can pay £2800 in and the government will top it up by 20% or £720, making a total contribution of £3600.

Taking action

Being aware of the allowances available and making the most of them will help you stay tax-efficient while at the same time providing your grandchildren with financial security.

Please contact us if you’d like any more recommendations on how to use your finances effectively so you can lend a helping hand.

Jul 18
5

Pensions: Should I Take My 25% Lump Sum?

By | Pensions

One of the main advantages of saving into a pension is the option of a lump sum when you retire. Under current rules, most pension schemes allow you to withdraw 25% of the value as a tax-free lump sum. Some older-style occupational plans might allow you to take even more. This can provide a valuable boost to your retirement plans.

But just because this is the default option, is it the best solution for you? You can draw your pension in any manner you choose, providing you are over the minimum retirement age (currently 55, although rising to 57 by 2028).

In this guide, we look at the pros and cons of taking your lump sum and how it can fit in with your wider financial strategy.

What Do You Need the Money For?

A lump sum can be extremely useful when you retire. Reasons might include:

  • Paying off your mortgage
  • Undertaking home improvements
  • Helping family
  • Taking the holiday of a lifetime

But you don’t actually need to retire to withdraw your lump sum. If you are 55 and don’t plan to retire for another 10 years, you can still withdraw your lump sum now.

Of course, this means that you have less in the pot to fund your retirement. You should always think carefully before withdrawing money from your pension. If you have cash or other assets available, it can be more efficient to spend that money first.

Similarly, just because you are retiring doesn’t mean that you have to take your lump sum.

Withdrawing your 25% lump sum can be a good idea if you have a specific reason for needing the money. If you don’t have a purpose in mind, it’s usually better to leave the money to grow in your pension fund rather than earn minimal interest in a bank account.

Phasing the Withdrawal

You don’t have to take your lump sum all at once. Instead, you can stage it over a number of years, either on its own or combined with pension income. This has the following advantages:

  • You can use the money to supplement your income without increasing your tax bill.
  • You can vary the amount you withdraw as needed.
  • Your remaining pension fund will continue to grow, potentially increasing the amount that you can withdraw later.

This can be the ideal option if you don’t actually need a lump sum, but want to generate a tax-efficient income.

Investment Options

Money invested in your pension fund grows free of most taxes. This, combined with tax relief on your contributions and the option to take a tax-free lump sum, makes pensions one of the most tax-efficient investment choices available.

If you withdraw your lump sum, you can re-invest the money. Depending on fluctuations in the market, it should continue to grow in value.

But this means the fund will be taxed like any other investment. You can place £20,000 per year in an ISA. However, any funds outside your ISA or pension will be subject to tax on interest, dividends, or capital gains.

In the current market, there are very few legitimate, regulated investments that you can’t access within a pension.

If you are considering taking your lump sum to invest elsewhere, moving your pension fund could allow you to do this without unravelling the beneficial tax treatment.

Passing on Wealth

Currently, pension funds are not included in your estate for inheritance tax purposes. Your pension can be passed on to your beneficiaries free of any tax if you die before age 75. If you die after age 75, your beneficiaries can withdraw your pension as an income and will be taxed at their own marginal rate.

If you want to make gifts during your lifetime, taking your tax-free lump sum is one way of funding this. However, withdrawing the money from your pension places it in your estate, potentially increasing your inheritance tax liability. Even when you give the money away, it remains in your estate for seven years.
It’s usually more efficient to use other assets first when making lifetime gifts, such as cash or investment funds. This means that your pension can continue to grow tax-efficiently outside your estate.

Continuing with Contributions

If you take taxable income from your pension, this triggers the Money Purchase Annual Allowance (MPAA), which restricts future contributions to £10,000 per year (gross).

Withdrawing a lump sum does not trigger the MPAA, which means you can continue making higher contributions.

However, there are rules around recycling tax-free cash to prevent people receiving double tax relief. Contributions may be classed as recycling if all of the following occur:

  • The lump sum is over £7,500
  • Contributions have increased by 30% or more
  • The contributions comprise more than 30% of the lump sum
  • The recycling is pre-planned

Recycling tax-free cash can result in unauthorised payment charges being applied to your lump sum. This can be up to 55%, as well as sanctions on the pension scheme.

Defined Benefit Schemes

This guide is mainly concerned with money purchase pension schemes, which allow you to flexibly withdraw 25% (or more) of the fund value.

Defined benefit schemes work differently, as once you choose your retirement options, you cannot change your mind later. You may be offered a lump sum under the scheme rules, or you might need to give up some of your income in exchange for a lump sum.

This can be a complex decision, and will depend on your circumstances, requirements, and the rules of the scheme.

Pension freedoms mean that you have more options than ever around how you take your pension benefits. A financial planner can help you create a retirement strategy that works for your lifestyle, goals, and tax situation.

Please don’t hesitate to contact a member of the team to find out more about retirement planning.

Jun 19
5

How to Integrate Your Financial Plan with Your Will

By | Financial Planning

While many clients understand the potential of an investment plan or the tax-efficiency of a pension, estate planning is a less exciting prospect. No one wants to think about their own mortality, and taking steps to plan for death can seem like tempting fate.

But rather than dwelling on the negatives, this article focuses on the opportunities. The main benefits of estate planning are:

  • More of your money will go to those you have intended
  • There are ways to minimise tax
  • Comfort in knowing that your loved ones are taken care of
  • Realising that the money you have worked for will leave a legacy for many years beyond your own lifetime

When creating a financial plan for our clients, one of the key points we address is the need for a Will.

Why You Need a Will

Making a Will is one of the easiest financial decisions to put off, but it is also very simple to complete. The assumption that your estate will be distributed according to your wishes, even without a Will is all too common.

If you die without a Will, this is known as intestacy. The rules of intestacy are complex and depend on your family situation, as well as where you are in the UK. More information can be found at:

https://www.gov.uk/inherits-someone-dies-without-will

A number of factors would indicate that settling for intestacy is not the best course of action. For example:

  • You would like your spouse to inherit everything in the first instance, with assets only passing to your children on the second death.
  • If your spouse is financially independent, you may prefer for your estate to pass directly to your children.
  • You do not have a spouse or children and would like to nominate relatives, friends or charities to receive your assets.
  • You are in a common-law relationship. Without a legal marriage or civil partnership, your partner has no automatic right to inherit.
  • You would like your step-children to benefit.
  • You would like to have some control over what happens to your money after you die, for example, by setting up a Trust.
  • You would like other wishes to be taken into account, such as care arrangements for children or funeral arrangements.

Making a Will is particularly important if you have a less than straightforward family situation, as it is very unlikely the rules of intestacy will suit your circumstances.

How a Financial Plan Can Help

The main purpose of a financial plan is to determine how much money you need, either from existing assets or future income, to achieve everything you wish during your lifetime.

When you have worked hard for this money, it is worth thinking about the kind of legacy you would like to leave behind. Depending on where you are in your financial journey, this may involve:

  • Arranging life insurance to make sure your family are provided for.
  • Making regular gifts during your lifetime. Not only does this help to minimise inheritance tax, but also allows you to see your loved ones benefitting from the money.
  • Setting up Trusts, using either existing capital or life insurance benefits.
  • Making gifts to charity, or even setting up your own Charitable Trust.

When you have decided what is important to you during your life, this can help to inform the bequests you make within your Will.

Making Use of Trusts

Trusts can be set up during your lifetime, or be created on your death as directed by your Will.

Lifetime Trusts should be undertaken as part of your wider financial plan. They should take into account:

  • How much money you can afford to give away.
  • Your wishes, and the level of control you would like to have over the Trust.
  • Whether you need to retain any access to the Trust funds. A few Trust structures allow this, but in general, the more access you have to the money, the less effective the Trust is for Inheritance Tax purposes.
  • The source of funds for the Trust, whether this is a gift or a life insurance policy.

You can also set up Trusts via your Will. You might want to do this for the following reasons:

  • To set aside money for children who are not yet of age.
  • To control who has access to the funds. This may include your spouse, children, grandchildren and anyone else you specify. If all of your assets pass to a spouse and they then remarry, this places your children at risk of not inheriting anything if their surviving parent dies. A Trust can also protect funds if any of the beneficiaries get divorced or are declared bankrupt.
  • To control when the money is received by the beneficiaries and if any conditions apply.

You can write a Letter of Wishes to direct your Trustees how the money should be dealt with.

How Your Pension Can Help

While pensions are not specifically designed for estate planning, they have the following benefits from a legacy perspective:

  • Pensions can be paid out to your beneficiaries free of tax if you die before age 75. After age 75, the beneficiaries will pay tax at their own highest marginal rate of Income Tax rate and can withdraw the money flexibly as required.
  • You can create an Expression of Wishes nomination to inform your Pension Trustees what should happen to your pension fund if you die. While the Trustees are not bound by this, they will usually follow your wishes unless there is a strong reason not to.
  • Your Expression of Wishes can either follow the provisions in your Will, or be entirely separate.
  • A good financial plan will combine retirement income planning and estate planning. For example, by drawing on assets within the estate first (which would be subject to Inheritance Tax) and preserving the pension, this can reduce the amount of tax paid and increase the amount available for your beneficiaries.

Top 5 Tips When Writing Your Will

When creating your Will, consider the following:

  • Make sure your Will is securely stored, and that your Executors know what to do in the event of your death.
  • If you leave at least 10% of your estate to charity, your rate of Inheritance Tax reduces from 40% to 36%.
  • Ask your legal adviser if a Trust would be an effective way of administering your estate.
  • Where possible, avoid nominating your solicitor as Executor. This can work out more expensive, and can result in a conflict of interests.
  • While you are dealing with legal matters, you should also have Powers of Attorney completed. This allows your attorneys to make decisions about your finances and care if you become incapacitated. It is therefore important to give careful consideration to who you nominate as your attorneys.

Please don’t hesitate to contact a member of the team if you would like to find out more about your estate planning options.

Apr 30
1

The British ISA – What We Know So Far

By | Investment Planning

While the reduction to National Insurance rates captured the headlines, another measure announced in the Spring 2024 Budget was the introduction of a British ISA. This will offer an additional £5,000 ISA allowance for anyone wishing to invest in British assets.

The intention is to stimulate growth in the British economy while rewarding investors for buying local.

Full details are still to be announced, and the proposals are still at the consultation stage. Below, we outline what we know so far.

The Current ISA Rules

The current ISA regime has been around since 1999, with allowances remaining unchanged since 2017. The main rules are as follows:

  • You can contribute up to £20,000 to an ISA.
  • You can use your ISA to hold cash, stocks and shares, or a mix of both.
  • All income and growth generated by an ISA is tax-free, and you can usually withdraw your money without restriction or penalty (unless you have specifically bought a product with a fixed term).
  • If you take money out of your ISA, you can replace it in the same tax year without using up any of your allowance.
  • ISAs can be transferred between managers, and you can switch between cash and stocks & shares.
  • ISAs can be transferred to a spouse on death via an Additional Permitted Subscription.

ISAs are highly tax-efficient, and along with pensions, form an essential building block in a sensible investment an efficient financial plan.

How Will the British ISA Work?

Details are still light on how the scheme will actually work. What we know, is that investors will have an additional allowance of £5,000 to invest only in British assets. This effectively increases the ISA allowance to £25,000.

The likelihood is that the British ISA will not be incorporated into existing stocks and shares ISAs, but will be introduced as a new, separate wrapper. This means that an investor could theoretically have up to four different ISAs – cash, stocks & shares, a Lifetime ISA, and a British ISA.

A consultation is underway to nail down the specifics. This is expected to be completed by 6th June 2024.

Details Still to Be Confirmed

Firstly, between the consultation period and the upcoming election, nothing is certain. The British ISA is simply an idea at this point, with no certainty over if, or when it will come to fruition.

If it does pass into legislation, it is likely to be April 2025 at the earliest before it becomes available. This is on the basis that investment providers can offer it. Some may choose not to, and others might not enter the market right away.

There is also some uncertainty over what the scheme can invest in. Shares in listed British companies are likely to be on the list, and it has also been indicated that shares listed on the AIM market could also qualify.

It is possible that collective funds such as OEICs, corporate bonds, gilts and possibly even cash in British institutions should also qualify. There is some uncertainty over investment trusts, as these are technically listed British companies, but can invest in a wide range of global assets – it is likely that some controls will be put in place to limit the underlying investments that can be accessed.

Transfer rules are also yet to be announced. Transferring an existing ISA to a British ISA is likely to be counterproductive, as you could buy the same assets within a standard ISA. However, if it is possible to transfer out of a British ISA, investors could take advantage of the increased allowance before moving their money elsewhere to access more investment options. This might be good for investors, but defeats the purpose of encouraging investment into the British economy.

Should You Invest in a British ISA?

In theory, an additional ISA allowance offers the chance to save more and reduce your tax bill.

But not everyone uses their full ISA allowance every year. Research by Sanlam indicates that as of the 2020/2021 tax year, only 33% of investors with between £50,000 and £100,000 of investable capital used their full ISA allowance. The figure increased to 48% for those with under £50,000 and to 71% for investors with over £1 million.

For some investors, prioritising a pension is likely to offer a better return over the longer term. Pensions have more limitations, but ultimately offer a higher level of tax relief. Of course, many people have other demands on their money, including getting on the property ladder, saving for children, or simply dealing with the cost of living.

It is likely that the British ISA will benefit a relatively small segment of the investing population. Whether or not it boosts British growth remains to be seen. However, surveys indicate that around 48% of adults would consider investing in a British ISA, with this figure rising to 63% amongst existing stocks & shares ISA investors.

One of the risks of investing in a British ISA is concentration risk. The UK makes up around 4.1% of the global economy by market share, behind the US (58.4%) and Japan (6.3%). However, if you use your British ISA allowance every year in addition to the standard allowance, this could mean holding at least 20% in the UK. Home bias is already an issue for investors, and British ISAs could be seen to be encouraging this.

It’s important to make sure that your portfolio is well-diversified and invested at a suitable risk level. So, if you do choose to invest in a British ISA, you might want to make some adjustments to your other investments to ensure they are well-balanced.

An investment plan should not be based around new products or gimmicks. However, if a new product or tax break allows you to do what you were planning to do anyway, but with additional benefits, then it is worth considering.

Please don’t hesitate to contact a member of the team to find out more about your investment options.

Mar 07
1

Spring Budget Summary 2024

By | Financial Planning

Jeremy Hunt delivered his much-awaited budget on 7 March. Given the upcoming election and challenging public opinion, the government has recently been under significant political pressure to assuage voters.

The headline measure was the cut to National Insurance rates, following a similar cut already announced in November 2023. Child benefit rules are also to be overhauled, and a new British ISA allowance is set to provide tax breaks for individuals investing in UK companies.

The key points are outlined below.

The Economy

  • The rate of inflation (currently 4%) is expected to reduce to the Bank of England target of 2% within a few months. This is an improvement on the Autumn statement’s forecast, which suggested that this target would not be reached until 2025.
  • Economic growth is projected to be 0.8% this year and 1.9% in 2025. Again, this is higher than estimated in November.
  • The rates are estimated to be 2%, 1.8%, and 1.7% in the three subsequent years, respectively.
  • 2022/2023 saw the largest drop in living standards since Office for National Statistics records began in the 1950s. However, real household disposable income is expected to return to pre-pandemic levels by 2025/2026, two years ahead of the November forecast.
  • Tax revenue is expected to rise to 37.1% of GDP by 2028/2029, the highest level since 1948. Despite highly publicised efforts to cut taxes, the freeze in personal tax thresholds means that most people will continue to pay more tax.
  • Public spending will grow at 1% in real terms rather than in line with inflation. This represents an 8% real terms drop since the policy was introduced in 2021.
  • Borrowing for the current tax year is estimated as £113 billion, which is £11 billion below the Office for Budget Responsibility’s November forecast.

Tax

  • As of April 2024, the rate of National Insurance contributions for employees will be cut from 10% to 8%. This is expected to save around £450 per year for someone earning an average salary of £35,000.
  • This follows the 2% cut (from 12% to 10%) already announced in November.
  • Non-dom status will be scrapped by April 2025. This refers to people who live in the UK but are domiciled (i.e. have permanent links) abroad and, therefore, only pay UK tax on UK income. The new rules mean that after four years of living in the UK, anyone with non-dom status will pay the same tax on worldwide income as other residents.

Work and Benefits

  • The earnings threshold for starting to lose Child Benefit will be increased from £50,000 to £60,000. Additionally, the level at which the benefit is lost completely will increase from £60,000 to £80,000. This will apply from April 2024.
  • Plans are in place to apply the limitations to household income rather than individuals starting in April 2026.

Investing

  • A new ‘British ISA’ scheme is to be introduced, offering investors an additional £5,000 ISA allowance to invest in British assets.
  • This is due for a consultation, with details and the timeline still to be announced.

Property

  • The capital gains tax rate (CGT) on property sales will reduce from 28% to 24%. This will benefit landlords and second homeowners who sell their properties, as CGT does not apply to the sale of a main residence.
  • However, the furnished holiday let scheme will be scrapped. This will reduce tax breaks on short-term lets and ultimately make it less profitable to let to holidaymakers than to long-term tenants.

Alcohol, Tobacco, & Fuel

  • Plans to increase alcohol duty by 3% in 2024 have been scrapped. Current rates will be frozen until February 2025.
  • Tobacco duty will increase and a levy on vape products will also be introduced in October 2026.
  • The fuel duty will also remain frozen for at least one more year. The 5% cut introduced in 2022 was due to expire this month but has now been extended.

Public Sector

  • Plans to digitise the NHS and make it more efficient are being introduced. Some of the measures mentioned include AI form-filling and making improvements to the NHS app.
  • Military spending is due to increase from 2% of GDP to 2.5%.

Childcare

  • Free childcare hours for children aged 9 months and over will continue for the next two years.
  • However, nurseries continue to struggle with rising costs and limited resources, which means that the free hours will not necessarily translate into more nursery places. Additional support has been promised, but concrete details are sparse.

The Arts

  • Independent films with a budget of below £15 million will benefit from a new tax credit.
  • Film studios will also benefit from 40% relief on business rates until 2034.
  • The National Theatre will receive a £26.4 million upgrade to its stages.

Conclusion

The new measures will mainly benefit middle-to-high earners, along with a small boost for property owners wishing to sell.

One of the main criticisms of the NI cut is that it benefits a specific portion of the population – people who are working and earning a reasonable income. The overall tax burden on the population will continue to increase given the freeze to the allowances and thresholds, which is expected to remain in place until 2028.

Doubts have also been raised about spending plans, which, along with the NI cut, will be funded in part by higher borrowing. Public finances are tight, and it has been argued that money could be better spent on public services. However, with Labour still leading the polls, it’s possible that this will be the next government’s problem to solve.

Please don’t hesitate to contact a team member to learn more about the topics covered.

Feb 15
1

Tax Year End Planning Guide – 2023/2024

By | Tax Planning

With the end of the tax year fast approaching, it’s a good time to organise your finances and make sure you make the most of your tax allowances, reliefs, and exemptions. Some of these allowances will be lost if you don’t use them before the end of the tax year. Additionally others will be reduced in the new tax year due to legislative changes.

This guide explains the main areas of planning you need to consider before the end of the tax year.

This year it’s important to note that the tax year end falls just after the long Easter weekend and therefore processing times may take slightly longer than usual. Our advice is always to beat the rush by being prepared and organised well in advance.

Individual Savings Accounts (ISAs)

  • You can contribute up to £20,000 to your ISA in the current tax year.
  • You need to use this allowance by 5th April 2024, or it will be lost.
  • If your ISA is a ‘flexible ISA’ then you can also replace any withdrawals within the same tax year. Again, you need to do this by 5th April, or that additional ‘replacement subscription’ opportunity is lost.
  • No tax is payable on any of the income or growth within your ISA, and you can usually withdraw money without penalty. Any money withdrawn can be replaced in the same tax year without using any of your allowance.
  • Choose a Cash ISA if you are likely to need the money within a shorter timeframe (say, within 3-5 years). Interest rates have significantly improved in the last year so it’s worth shopping around.
  • A Stocks and Shares ISA might be for you if you are seeking long-term growth and can cope with some potential market volatility. You can switch between Cash and Stocks and Shares later if you wish.
  • Consider a Lifetime ISA (LISA) if you are saving for a first home.

Pension Contributions

  • Pensions are extremely tax-efficient.
  • You should make sure you take advantage of any pension funding offered by your employer.
  • It’s worth making the maximum contribution to your pension, depending on your available allowances and personal budget.
  • Check you are reclaiming higher and additional rate tax relief, particularly if you are making personal pension contributions.
  • Higher and additional rate taxpayers can also use pension contributions to reduce their effective earnings, and bring them into a lower tax band.
  • Make use of your carried forward allowances if available.
  • If you have already taken taxable benefits from your pension, you might have triggered the Money Purchase Annual Allowance. If this applies to you, it’s even more important that you use your allowance before 5th April.
  • Check if your remuneration will exceed £260,000 (including employer pension contributions) as this will also reduce your annual allowance.

Income Tax Allowances

You have a number of income tax allowances that can help to increase your net household income. If you arrange your income and assets efficiently, there is still time to make the most of these before the end of the tax year. For example:

  • Personal Allowance – you can earn up to £12,570 before paying tax. If you are taking income from a pension, or planning a withdrawal from a bond, you can use this allowance to offset tax. Similarly, if you own a business, it’s a good idea to take some of your income as a salary to make use of this allowance.
  • Marriage Allowance – a lower-earning spouse can transfer up to £1,260 of their tax-free personal allowance to their higher-earning partner, potentially reducing the family’s tax bill by up to £252.
  • Dividend Allowance – dividends of up to £1,000 per year may be drawn (from your own company or from investments) without tax liability. This is reducing to £500 from April 2024, so if you have retained profits in a company, it’s worth making the most of this now.
  • You can transfer assets to your spouse if they pay a lower rate of tax, or to make use of both savings allowances.

Capital Gains Tax Exemptions

  • When you sell investments or property, you might need to pay Capital Gains Tax (CGT) on the profits.
  • You can use your annual exemption to avoid building up large taxable gains. This tax year, you can realise gains of up to £6,000 without paying tax. This is reducing to £3,000 from April 2024, so you could save tax by realising more in the current tax year.
  • Sell shares to realise a loss. The loss can be carried forward to set against gains in future years.
  • Allocate some shares to a spouse. This does not incur tax, and means that you have double the exemption to set against gains.

Inheritance Tax Planning

  • You can reduce your estate (and potential IHT liability) by making gifts to individuals, charities, or trusts. Charitable gifts are immediately outside your estate.
  • You can gift up to £3,000 per year, which is immediately outside your estate. You can also carry forward this allowance by up to one tax year. A couple could potentially gift up to £12,000 by using two tax years’ worth of allowances. Some other exemptions are also available.
  • If no exemptions apply, most gifts drop out of your estate after 7 complete years, so making the gift now starts the clock ticking earlier.

Tax Advantaged Investments

  • Consider investing in smaller, early-stage companies. This can be done via Alternative Investment Market (AIM) listed shares, Enterprise Investment Schemes (EIS) or Venture Capital Trusts (VCT). These are very high-risk investments and are only suitable for experienced investors who can afford to lose the money. Advice is strongly recommended.
  • Investing in this type of asset could reduce your income tax bill by up to 30% of the investment amount, or 50% if the investment is allocated to a particularly high-risk version of the EIS.
  • An EIS investment offers the added advantage of being able to carry-back relief to the previous tax year, as well as the option to defer CGT on gains realised from other investments.
  • AIM and EIS investments are also considered to be business assets and are usually subject to 100% Inheritance Tax relief if held for at least 2 years.

Charitable Gifting

  • Make any charitable gifts you were planning before the end of the tax year. Gift Aid can increase the value of the gift in the hands of the charity, as well as reducing your tax bill.
  • Remember to claim tax relief on any charitable gifts made in 2022/2023, as you can carry-back tax relief to the previous tax year, providing this is done before your tax return is due. This can be useful if your tax bill was higher last year.
  • Think about gifting shares. No capital gains tax is due either when you gift the shares, or when the charity eventually sells them.

Saving for Children

  • Top up any Junior ISAs for your children or grandchildren. You can contribute up to £9,000 in the current tax year.
  • Consider making pension contributions for your child. Anyone can contribute up to £2,880 per year (grossed up to £3,600) to a pension for tax-efficient growth.
  • These gifts can be extra efficient if you use them in conjunction with your gifting allowances above, or as regular gifts from surplus income.

Please don’t hesitate to contact a member of the team if you would like to find out more about planning for the tax year-end.

Jan 18
1

Bonus Sacrifice – Should You Use it to Save Tax?

By | Tax Planning

If you are fortunate enough to receive a bonus this year, you may be considering ways to save tax. While a cash windfall is always welcome, your bonus might push you into higher rates of tax, meaning that you receive less than you were expecting.
Below, we explain how your bonus is taxed and some options for making savings.

Your Bonus – Tax Treatment

If you receive a bonus, this is added to your other income for the tax year to calculate your tax liability. This means you will pay tax on your bonus at your highest marginal rate.

National Insurance will also apply and if you have any other deductions from your salary, such as student loan repayments, these will also factor into the calculation.

A key point to be mindful of is that receiving a bonus can push you into the next tax band. Going from basic rate to higher rate tax can mean increasing your tax bill on the bonus by up to 20%.

If your bonus takes your earnings over £100,000, you will also start to lose your personal tax-free allowance of £12,570. This can take the effective tax rate on your bonus as high as 60%, as not only are you paying higher rate tax, but you are also extending the amount of income that is taxed overall.

Even if you have checked the tax treatment and are comfortable with the extra tax, remember to check your pay slip for emergency tax coding. Sometimes when you receive a one-off payment, HMRC will assume you will receive the same amount every month and adjust your tax code accordingly. This means paying significantly more tax, potentially for the rest of the tax year. It is normally corrected at the end of the tax year, or you can contact HMRC to receive a refund sooner.

How You Can Save Tax by Making Pension Contributions

Making a pension contribution is one way to reduce the amount of tax you pay on your bonus.

If your employer can arrange this through salary sacrifice, the administration is fairly simple. The bonus will be paid into your pension as an employer contribution and you won’t pay tax or National Insurance on it.

If your employer makes pension contributions via the ‘net pay method,’ your tax will be automatically reduced, but you won’t necessarily receive relief from National Insurance contributions.

If your employer is unable to pay the bonus into your pension, or you decide to make the contribution later, you can arrange a personal contribution. Basic rate tax relief is credited automatically, which means that for every £80 you contribute personally, HMRC adds a further £20. This means a gross contribution of £10,000 will only cost you £8,000 from net income.

There are, of course, limits to this. Pension contributions are generally capped at your gross annual earnings or the annual allowance (£60,000), whichever is lower. However, if you earn more than the annual allowance, you may be able to carry forward allowances from up to three previous tax years. This means that higher earners receiving a large one-off bonus have considerable scope to top-up their pensions.

The limits on pension contributions and tax relief available are explained further here.

Pensions are highly tax-efficient investments and do not incur any tax when the funds are invested. Currently, you can also pass the funds to your beneficiaries tax-free if you die before age 75. After age 75, any income drawn by your beneficiaries is simply taxable at their own marginal rate.

Are There Any Downsides?

The main downside to funding your pension is that you can’t access the money until your minimum retirement age. This is currently age 55, but is expected to rise to 57, and subsequently 58 as the State Pension is also due to increase.

At your retirement age, you can take up to 25% of your pension as a tax-free lump sum. The remainder is then taxed at your marginal rate. So, while you can substantially reduce the amount of tax you pay on your bonus, particularly if you move from higher to basic rate tax in retirement, you will probably still pay some tax on it eventually if you take benefits from your pension.

There is also the chance that the investments in your pension will be exposed to market volatility. You may even lose money, particularly if you make the an investment into equities close to your retirement age.

You also need to be mindful of pension allowances. Breaching the annual allowance means not only being taxed on the money as if it was earned income, but that the money is now tied up in a pension, to be taxed a second time if you take retirement benefits.

If you earn over £240,000 or have already taken benefits from your pension, you will have a lower annual allowance.

These risks can easily be addressed by careful planning, for example:

  • Keeping enough cash to cover potential emergencies and any planned spending.
  • Only investing if you can hold the fund for at least five years (ideally longer).
  • Investing in a suitable range of funds which is well diversified and matches the appropriate risk level.
  • Taking advice on larger pension contributions, particularly if you are a higher earner.

Other Options for Saving Tax

If you have maximised your pension allowances or wish to take a different route, there are a few other options to tax-efficiently invest your bonus, for example:

  • ISAs – while you don’t receive any tax relief on your contributions, all income and growth are tax-free and you can access your savings flexibly. This might be a suitable option if you are likely to need the money before retirement age and are comfortable paying tax on the bonus.
  • Venture Capital Trusts (VCTs) – these offer income tax relief of 30%, providing the relief is no more than your tax bill and you hold the investment for at least five years.
  • Enterprise Investment Schemes (EIS) – similarly, these schemes offer income tax relief of 30% (as well as benefits in terms of capital gains tax and inheritance tax), with a minimum holding period of three years.
  • Seed Enterprise Investment Schemes (SEIS) – these are a subset of the EIS regime and offer income tax relief of up to 50%. However, they are significantly higher risk as they target very early-stage companies.

The latter three options are very high-risk investments which invest in smaller companies. While the tax relief is a strong incentive to invest, you could lose some or all of your capital.

It’s a good idea to seek tax advice if you are considering higher risk investments or tax planning, as getting it wrong can cost much more than you saved.

Please don’t hesitate to contact a member of the team if you would like to discuss financial planning and tax.

Nov 30
1

The Autumn Statement 2023

By | Financial Planning

Jeremy Hunt delivered the Autumn Statement on 22 November following weeks of speculation about potential tax cuts. The headline measure, a reduction to National Insurance Contributions was something of a surprise. Beyond this, economic measures are looking more positive than indicated in March, and the government has committed to continue investing in businesses to boost growth.

The main measures announced are covered below.

The Economy

  • Inflation is expected to reduce to 2.8% by the end of 2024.
  • Overall, the rate is expected to stay ‘higher for longer,’ and is unlikely to drop to the Bank of England’s 2% target until 2025, a year later than previously predicted.
  • Based on this, it is suggested that the base rate will remain at around 4% until 2028, rather than dropping to 3% as previously indicated.
  • It is anticipated that the economy will grow by 0.6% this year and 0.7% next year. Incremental growth of 1.4% – 2% per year is expected over the following four years.
  • Overall, the economy has grown by 1.8% since before the pandemic.
  • In March, it was predicted that the economy would shrink by 0.2% this year, before growing at a higher rate than currently predicted. This suggests slower growth from a higher starting point than previously predicted.
  • Government debt is projected at 94% of GDP, which is lower than predicted in March.
  • The budget deficit, or difference between spending and income, is currently 4.5%.
  • Public borrowing is estimated at 5.1% of GDP, or around £132 billion.
  • While these figures are an improvement from March, it is likely that there will be little difference in long-term projections due to the additional cost of the measures announced.

Personal tax

  • The main rate of employee National Insurance Contributions are to be cut from 12% to 10%. This will take effect from 6 January 2024.
  • Class 2 National Insurance, payable by self-employed people at a rate of £3.45 per week, will be abolished.
  • Self-employed people will also see a 1% cut to Class 4 NI contributions, from 9% to 8%.
  • Both changes to self-employed rates will take effect from April 2024.
  • There were no changes to Inheritance Tax, despite discussions in the preceding weeks.
  • Alcohol duty will be frozen until August 2024 while tobacco duty will increase at 2% above inflation (12% above inflation for hand-rolled tobacco). No changes to fuel duty have been announced.

Pensions

  • A pension ‘pot for life’ will be introduced. This is intended to give employees more choice over where their pensions are invested and reduce the number of ‘small pots’ accumulated over the course of a working life.
  • The State Pension ‘triple-lock’ was re-affirmed, with an increase of 8.5% to retirement income from April 2024.

Investments

  • Currently, ISA investors can contribute to one cash ISA, and one stocks and shares ISA. From April 2024, this restriction will be removed. The contribution limit will remain at £20,000 per year.
  • The scope of investment choice for ISAs will also be widened to allow access to ‘long-term asset funds,’ which invest in illiquid assets such as property and private equity.
  • The government has committed to extend the tax advantages of Venture Capital Trusts and Enterprise Investment Schemes to 2035. This change follows a post-Brexit consultation as these investments did not align with EU rules.

Energy Crisis

  • Anyone living near new pylons and transmission infrastructure could be offered up to £10,000 off their energy bills over the next 10 years.

Business

  • Temporary measures allowing businesses to offset the cost of capital investment in the company (for example, by purchasing new equipment) will be made permanent.
  • Business rates will be discounted for hospitality, leisure, and retail businesses.
  • The government plans to invest £4.5 billion in manufacturing and £1 billion in aerospace/green technology between 2025 and 2030.
  • New investment zones will be introduced in Wrexham, Greater Manchester, the West Midlands and the East Midlands.
  • £80 million will be directed towards new levelling up projects in Scotland.
  • It is hoped that the total package of measures for businesses will increase investment by up to 1% of GDP.
  • The government is considering a sale of its remaining stake in NatWest Group following the bank’s bail out in 2008.

Property

  • New rules are under discussion which would allow existing houses to be converted to two flats, providing the exterior of the property is unchanged. This is intended to increase the number of homes available.

Work and Benefits

  • The National Living Wage will increase to £11.44 per hour from April 2024. This will be extended to all workers aged 21 and over.
  • The rate will increase to £8.60 per hour for 18- to 20-year-olds.
  • Universal credit and other benefits will increase by 6.7%, equivalent to September’s inflation rate. This represents an average gain of £470 for 5.5 million households.
  • Local housing allowance is to be increased, with an average raise of £800 for £1.6 million households. These rates have been frozen since 2020, despite average rental increases of over 30%.
  • Anyone claiming unemployment benefits will need to undertake mandatory work experience if they do not find a job within 18 months. If they do not actively look for work, benefits will be stopped.
  • £1.3 billion will be allocated over the next five years to help people with health conditions get back into work.

Public Services

  • £14.1 billion has been pledged for the NHS and adult social care, while schools will receive £2 billion in the current and next tax years.
  • Defence spending will remain at 2% of national income, with overseas aid spending falling 0.2% below target at 0.5%.

How Will You Be Affected?

If you are employed or self-employed, you can expect your net income to increase due to the reduction in National Insurance. Anyone receiving an income from pensions or investments will not be affected by this change.

Lower earners may benefit from the increase to the National Living Wage, particularly as this has now been extended to anyone aged 21 and above. However, despite the increases to benefit payments, the likelihood is that anyone claiming benefits will face increased pressure to find work, whether this is feasible or not.

While pension savers may eventually benefit from the ‘pot for life’ concept, the reality is many years away and concrete details are not yet available. It has been pointed out that investors can already set up pension schemes independently of their employer and that perhaps more guidance would have a greater impact than a brand-new pension system.

Conclusions

After weeks of speculation about a reduction to Inheritance Tax, the cut to NI rates was unexpected. However, this will offer more benefit to the average worker versus a tax cut on large estates.

Criticisms for the measures from Labour were limited and mainly focused on the idea that it was too little too late. The NI cut has been generally welcomed, but it was felt that it did not begin to compensate for frozen thresholds and stealth taxes.

Please do not hesitate to contact a member of the team if you would like to discuss any of the topics covered.