A Taxing Agenda
The party conference season is out of the way and politicians of all persuasions are now gearing up for next year’s general election with a raft of incentives and proposals to appeal to Britain’s long-suffering savers and taxpayers. From new rules for Individual Savings Accounts (ISAs) to increased flexibility for pensions and the traditional pre-election battleground of Inheritance Tax (IHT).
Of course, most people will have little to be concerned about, but should err on the side of caution on all tax-saving matters, seek expert help and avoid high-powered tax-planning ideas. As a number of celebrity investors have recently discovered, if a tax-saving scheme sounds too good to be true, it probably is.
There are still ways in which people can legitimately reduce their tax bills. Individuals can make the most of allowances and reliefs available to their family and spouse. They can make the most of the opportunities available to invest and to save tax-efficiently through ISAs, pensions and other tax-advantaged investments, such as Venture Capital Trusts and Enterprise Investment Schemes.
For savers and investors, the changes to ISAs introduced in July this year were a very welcome and overdue boost, offering greater flexibility and an enticing increase to £15,000 for the annual allowance. The amount allocated to Stocks & Shares ISAs increased 12% year-on-year in 2013/14, as investors sought to take advantage of the recent recovery in markets.
Tax changes
Chancellor George Osborne followed this up with his recently announced changes to the taxation of pension death benefits, which will enable many people who have, in his words, “worked hard and saved all their lives”, to pass on their pensions to loved ones tax-free. There are also plans to give members of defined contribution pension schemes unrestricted access to their retirement savings from the age of 55. Suddenly, pensions look a lot less inflexible and a great deal more appealing. More than ever, those looking to invest tax-efficiently to fulfil their hopes for retirement need to consider the virtues of pensions alongside ISAs and get the right help to ensure the appropriate strategy for their individual circumstances and goals.
The details of the death benefit changes are yet to be firmed up, but the proposals are due to come into effect from next April alongside the other pension reforms in the Budget. The proposals raise a number of financial planning needs, from the review of wills and pension beneficiaries, to reconsidering pension contributions and opportunities for IHT planning. Households paid IHT bills of £3.4 billion last year, more than at any point since the start of the recession, as property prices continued to rise, and the nil-rate band of £325,000 remained frozen.
Meanwhile, David Cameron has repeated the pledge made by the Conservatives ahead of the last two elections to significantly increase the threshold. Taxpayers and voters will have to wait and see whether he is still willing and able to deliver this time.
Take action
Whether in terms of your estate or your income, there remain plenty of opportunities to plan your tax affairs more effectively. What it takes is a willingness to seek advice, discuss the issue and take action.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than you invested. Equities do not have the security of capital which is a characteristic of a deposit with a bank or building society. The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances. EISs and VCTs are suitable only for those willing to take a higher level of risk with their capital, as the underlying investments are generally held in small UK companies, which may not perform as originally hoped or in some circumstances may fail completely. Wills are not regulated by the Financial Conduct Authority.
As an Associate Partner Practice of St. James’s Wealth Management, Robert Hutchinson provides a wide range of wealth management services to both individuals and businesses in the East of England and Home Counties.
My emphasis is on maintaining a long term relationship with my clients and to provide them with a source of trusted advice as their needs evolve over the years.
St. James’s Place Wealth Management is a FTSE 100 company, recently awarded ”Best Wealth Manager 2013” Shares Awards 2013.
