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Act now to shelter from tax attack, IFAs warned

Industry experts say advisers should seize the opportunity to review their clients’ tax planning ahead of post-election fiscal tightening.

Heron House Financial Management financial planning expert Saran Allott-Davey says that the Government’s requirement to raise more tax may lead to far less generous rules on capital gains tax, inheritance tax and could tighten the treatment of widely held investments such as bonds.

She says: “Once the election is over, there is almost certainly going to be a tightening of tax policy.

“In just a few months, many people may be pleased to have taken opportunities while they had the chance.”

Allott-Davey believes the £10,100 capital gains tax allowance and the 18 per cent level are vulnerable to change and that the inheritance tax exemption after seven years could also look overly generous to the new regime.

She highlights investment bonds as one area that should be reviewed and warns investors against deferring the tax on withdrawals from policies to a time when taxation levels could be more draconian.

She says: “There are some fairly straightforward actions people can take now that will remove the tax liability from the original investor for good, such as assigning policies to other family members if the income or if capital is no longer needed.”

Witan Investment Services marketing director James Frost says tax increases from the incoming Government could benefit Isas as investors will not want to risk getting taxed unnecessarily on gains.

But he says that because the Isa allowance is only £10,200 a year and many people have got much bigger portfolios, advisers will need to look at other avenues.

He says: “It may present an opportunity to advisers because people will need very specific tax advice and there may be more scope for products to be developed.”


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