Author: David Thurlow
Chartered Financial Planner and Investment Manager - Member of the Investment Committee
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Published: November 2024
I don’t believe it is an exaggeration to say that last week’s Budget was the most eventful this Century. That may sound like hyperbole, but it is also the view of key professional connections we have been meeting with over the last few days in a number of informal Budget think tanks.
In a rural region like East Anglia, it is hardly surprising that the changes to agricultural reliefs created much debate – as well as disbelief at the small numbers the Treasury seem to think will be affected. Considering our own client banks, we know of significant numbers of farmers that will be adversely affected unless they take action. We shared similar concerns at the possible fate of long-standing family businesses, some over a century old, that now face an uncertain future due to the impact of changes to Business Property Relief. Whether farmers or business owners, it is very likely that Wills need revisiting, as the proposed £1 million tax-free allowance is not intended to transfer between spouses on death. In practice, legal, tax and financial advice will be needed to mitigate the impact of the changes as far as possible.
Cambridgeshire is home to countless start up and high growth companies that rely on investment from angels and entrepreneurs and there are concerns that the restrictions to Business Property Relief might deter inward investment. The tax relief granted for investors is a fraction of the cost of direct investment by government, and generally yields better results. In our think tanks, there was relief that whilst Alternative Investment Market (AIM) quoted shares had lost some of their tax reliefs, there remained a 50% reduction in Inheritance Tax (IHT) rates to encourage investors to support this index that is so often the first place that fast growing companies list their shares publicly. There was generally relief that Capital Gains Tax (CGT) rates had not increased further, and that tax on dividends had not changed.
Bringing pensions into the estate for Inheritance Tax was a very hot topic of the think tanks, and likely to remain one for some time, given that changes are not due to be implemented until 6 April 2027. This gives time, we hope, for some of the more extreme aspects of the proposed new rules to be changed, such as the double taxation affecting the estates of those who die aged 75 or over. It is clear that on death, pension funds will not be paid out as quickly as before, as pension scheme administrators will need to liaise with the estate to establish tax to be paid. Previous advice regarding using pensions as an IHT friendly asset has to be revisited and professional advice will be more important than ever.
There was concern that the increases to employer NI could stifle growth, and that the reduction in the threshold for paying NI – which none of us saw coming – would be particularly harsh on organisations employing large numbers of people and operating on thinner margins. The NI changes have made salary sacrifice even more attractive as a means of making pension contributions.
It was clear from our think tanks that the government plans to abolish domicile and replace it with a residence-based test were far from straightforward and anyone who thinks they might be affected should be taking specialist legal and tax advice as there are clearly traps for the unwary. The changes to Stamp Duty, effective from the day after the Budget, had also caused some consternation.
These are just samples of the many areas we discussed during the think tanks. The value of being able to talk through key aspects with like-minded professionals with different areas of expertise cannot be over-estimated. By deepening our own knowledge, and by working so closely with legal and tax advisers, we ensure that all our clients receive the best advice when they need it, to guide them through the maze of financial change brought about by last week’s Budget.
If you would like to talk to one of our Chartered Financial Planners, please contact us on 01223 233331 or email info@mmwealth.co.uk.
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Opinions constitute our judgment as of this date and are subject to change without warning. The value of investments and the income from them can go down as well as up, and you may not recover the amount of your original investment.
The information in this article is not intended as an offer or solicitation to buy or sell securities or any other investment, nor does it constitute a personal recommendation.
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The information contained within this blog is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.
