BREWIN DOLPHIN 26 June 2015
Brewin Dolphin one of the UK's leading wealth managers urges the Chancellor to use the Summer budget as a platform to remove the continual erosion of the incentive to save - that has been created by endless tinkering with the pension system.
George Osborne will use the Summer Budget to push through the financial measures from the Conservative election manifesto, the first wholly Conservative Budget since November 1996.
Nick Fitzgerald, head of financial planning at Brewin Dolphin, says " This Chancellor has a reputation of pulling surprises out of his Budget Day hat and he may use his new-found House of Commons majority to unveil changes above and beyond those contained in the manifesto," Mr Fitzgerald said. "The obstacles that currently stand - whether on inheritance or capital gains tax, imbalanced savings incentives or pension growth limits - must be removed to promote the culture of saving that is so badly needed in this country."
Members of the Brewin Dolphin team have given their key predictions:
PENSIONS Government plans are to cut pensions tax relief for people earning more than £150,000, scaling back the tax-free allowance by £1 for every £2 they earn above that level. | Richard Harwood , divisional director of financial planning , comments: "This would make pensions tax relief a lot more complex, like the Labour system the Tories removed. It might sound politically attractive, but will be very costly to administer, particularly for final salary schemes. I would like to see more certainty and stability rather than messing about with the rule , so that individuals, employers and pensions providers can make long-term plans. If the Government learn from previous mistakes I would be surprised if this proposal was implemented or it was not significantly modified." |
The Previous Budget included plans to lower lifetime allowance from £1.25million to £1million in April 2016. | Rob Burgeman, investment manager and divisional director , says: " Rather than a lifetime limit, why not put a simple cap on how much people can pay into their pensions? Otherwise they are essentially being penalised for a successful investment strategy." |
INHERITANCE TAX Manifesto pledge to raise inheritance tax threshold to £1million. From 2017 the existing £325,000 tax-free threshold will be increased with a main residence allowance of £175,000. For married couples and civil partners that will see the total increase to £1million tax-free. | Richard Harwood comments: " There is a real danger of making IHT overly complicated. I would like to see something to simplify the system, such as a simple increase in the Nil Rate Band for all. I would also like to see more serious consideration of the elderly that need care but may end up holding onto inappropriate properties and not moving to residential care in order to reduce a tax liability. " |
TAX & NATIONAL INSURANCE Manifesto pledge to increase higher-rate income tax threshold to £50,000. | Rob Burgeman says: " At the moment the tax system is prejudiced against families where one parent works and one is more active in childcare. We would like to see a change to tax allowances so that couples could elect to be taxed jointly, with two sets of all allowances and two sets of pension allowances" |
SAVINGS | Rob Burgemanobserves: "We welcome any moves that encourage savings and investment and we see ISAs, which are an integral part of the long-term savings landscape, continuing to play an important role." |
BUY-TO-LET Some commentators have questioned whether buy-to-let landlords should receive tax breaks, such as tax relief on mortgage interest, which no longer applies to private homeowners. | Rob Burgeman notes, " Tax relief on interest on buy-to-let properties has created enormous distortions and priced out many first-time buyers. It encourages speculation and high levels of borrowing, as buy-to-let investors offset the costs of borrowing against rental income. This could be addressed, but will the Conservatives want to attack buy-to-let landlords who may be their natural supporters?" |
EIS & VCTs | Richard Harwood comments: " Previous rules for EIS have caused funds to be targeted at solar power, windfarms and biomass fuels and have made a big difference. There is a real opportunity here to use EIS relief to support social and affordable housing by encouraging investment for the good of society." |
TAX AVOIDANCE | Richard Harwood says, " Although we are likely to see the closure of some loopholes, this is hard to achieve - there may be more high-profile court cases to act as a deterrent. Whenever one loophole closes, another opens. Going down the route of naming and shaming may be a better way. " |
CAPITAL GAINS TAX | Rob Burgeman says: " It might not be high on the agenda, but we would like to see reform of capital gains tax. It is a very complicated tax that creates distortion. A big problem is that it does not make any allowance for inflation, so over long periods even modest amounts can have a big impact. " |
For more information please call the Brewin Dolphin press office on 020 3201 3330 or emailpress@brewin.co.uk
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The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin Ltd. No Director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document or its contents. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.
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