The Chancellor has delivered his Budget Statement.
THE KEY ISSUES OF NOTE ARE:
- No further substantial changes to pensions allowances, tax free cash or tax relief on pensions.
- Confirmation of previously announced measures such as the 45% tax rate, the new
- General Anti-Abuse Rule (GAAR) and the freezing of the nil rate Inheritance Tax (IHT)band to fund long term social care.
- A restriction on the ability to reduce the value of an estate for IHT purposes by deducting liabilities such as loans owed by the deceased if they will not be repaid.
- A consultation on allowing the transfer of Child Trust Funds to Junior ISAs.
The Chancellor also signposted several other measures, including:
- An increase in the amount which can be transferred free of IHT from a UK domiciled spouse to a non-UK domiciled spouse or civil partner, as well as the ability for a non-UK domiciled spouse or civil partner to elect to be treated as UK domiciled for IHT purposes.
- An extension of Capital Gains Tax (CGT) reliefs on Seed Enterprise Investment Scheme (SEIS) arrangements for reinvesting capital gains in the SEIS such that half the reinvested capital gain can benefit from relief. SEIS arrangements fund very small companies, often in unregulated structures which are high-risk investment opportunities.
- A view from HMRC that enhanced buybacks to obtain further Income Tax relief after the minimum holding period on Venture Capital Trusts (VCT) may not be operating in the spirit of the legislation. At this stage there is no further detail on HMRC’s view here and we are working with our VCT providers to assess any impact of this.
- A number of measures which will be particularly attractive and of interest to small businesses such as National Insurance changes, employer share scheme arrangements and CGT reliefs for business sales to employees.
- The abolition of Stamp Duty on Alternative Investment Market (AIM) shares and the reduction in Corporation Tax by a further 1% from 2014.
- The adoption of the recommendations made by the Dilnot Commission on Funding of Care and Support of a cap of £72,000 on reasonable social care costs from April 2016.
- The Budget – 20 March, 2013
The Chancellor confirmed the previously announced changes to pensions:
- The reduction in the pension Lifetime Allowance to £1.25m and the pension Annual Allowance to £40,000 from April 2014.
- Increase in capped drawdown limits from 100% to 120% of GAD rates from 26 March 2013.
In addition, the Chancellor also announced some further points affecting pensions:
- Confirmation that individuals with primary or enhanced protection who do not have lump sum protection will retain the right to a lump sum of up to 25% of £1.5m.
- The announcement of a consultation on Individual Protection for individuals with funds above £1.25m.
- An additional consultation on relaxing the investment rules for pensions so as to allow investing in conversions of unused commercial property to residential accommodation.
- Restrictions on flexible benefit arrangements where the contribution is made to the pension of a spouse or family member.
- The announcement that the flat rate state pension of £144pw will be introduced from April 2016, a year earlier than originally anticipated.
Once again, the government has emphasised its commitment to tackling what it sees as tax avoidance schemes. Tax avoidance has been described as the use of tax law in a way not envisaged by Parliament and the Chancellor confirmed the new General Anti-Abuse Rule will come into effect in 2013 and that the government will also focus on improving legislation which has been subject to repeated attempts at tax avoidance.
Tax year-end planning
Overall, nothing in the Budget reduces the need for you to consider how to structure your assets in a tax-efficient manner and with only a few weeks left in the current tax year, you may want to consider talking to your Partner about maximising the opportunities which exist such as:
- Fully utilising your ISA, VCT, EIS and pensions annual allowances (including carry forward of unused pensions allowances).
- Taking advantage of 50% tax relief if you are an additional rate taxpayer, whilst it lasts.
- Investing in a Junior ISA or a pension for your children or grandchildren.
- Using your annual Capital Gains Tax exemption.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances. The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.