This Budget – Chancellor Philip Hammond’s first Autumn Budget, let’s not forget – represented something of a landmark for me. It was the first time for over 25 years that I have gone home on Budget night.
Previous Budget nights have been spent dissecting the many implications for financial planning. Although that is not to say there were not a few stings in the tail this time around.
The Chancellor was classically wedged between a rock and a hard place. The rock being economic reality and a pessimistic growth forecast from the Office for Budget Responsibility, and the hard place being unfavourable opinion (opposition even) from many of his own party.
It was not going to be easy for “Fiscal Phil”. But it seems he is a man of principle and not one to be swerved from what he believes is right (morally and fiscally right, that is, as opposed to the right wing of his party).
Quite clearly, the potentially negative, bordering disastrous, near- to medium-term economic impact of Brexit will also be a factor for the UK’s economy. Those negative predictions may turn out to be wrong but many seem to accept they are more likely to be broadly correct.
All of this forms the backdrop to the changes announced at the Budget likely to have the greatest impact for financial planners. Given the forecasts and the Chancellor’s underlying philosophy, there was little scope for enormous giveaways.
The strong focus was on fixing (or at least contributing towards the fixing of) the housing market, incorporating actions related to both supply and demand.
Another fairly well-trailed theme was action to address intergenerational unfairness. Unsurprisingly, however, this did not extend as far as any radical reconstruction of pension tax relief to favour younger contributors.
So, here are the six main areas of relevance for financial planners:
- The proposed responses to the Patient Capital Review that deliver the opportunity to invest an additional £1m into EIS investments founded on knowledge-intensive companies, and introduce restrictions to EIS/VCT investments structured as low risk “capital return” plans with the return being substantially from the tax relief. We await the definitions.
- The removal of indexation allowance for companies (including life companies) from January. This will have an impact on the tax liabilities of UK life funds and companies investing in capital assets that produce a capital gain – for example, property and collective investments.
- A consultation to be launched on trust taxation. A sense of déjà vu on this one.
- Consumer research has been submitted to the Government on the impact inheritance tax reliefs and exemptions (in particular, business property relief and agricultural property relief) have on estate planning behaviour. It will be interesting to see what the Government intends to do, if anything, with the findings.
- The changes to the personal allowance, higher rate tax threshold and capital gains tax annual exemption, none of which are earth shattering but all of which need to be factored into planning.
- The consultation to be launched on off-payroll employment status and the use of personal service companies in the private sector.
The financial planning sector has had more intense loads of new provisions to deal with before, it is true. But some of the above should at least cause best practice planning to be reviewed, reconsidered and recalibrated where appropriate.
Tony Wickenden is joint managing director of Technical Connection. You can find him Tweeting @tecconn