Advisers are looking ahead to potential tax and savings changes, but the Government has kept its Budget cards close to its chest this morning.
Fewer major policy changes have been briefed by Number 10 ahead of time than in previous years, but commentators have been keen to stress that little is off the table.
Ascot Lloyd head of advice Jade Connolly says that Enterprise Investment Scheme and Venture Capital Trust tax relief changes could impact advisers’ higher net-worth clients.
She says: “Reducing the tax relief available from 30 per cent to a lower level may…be on the table. Since the Patient Capital Review, there has been much discussion that tax reliefs would be reduced in this area as there was a consensus that the industries supported by EIS and VCT no longer required private investment. It would also be a tax reduction for the rich, as only those who are high net worth traditionally invest into such arrangements. Nevertheless, EIS and VCT still support growing economies in the UK and any removal of Business Property Relief on the Aim market could send a shock wave through the market.”
While few are predicting a move towards a flat rate of relief, the possibility of changes to the annual allowance has been discussed by the industry.
Analysis by AJ Bell notes that if the current level was reduced from £40,000 to £30,000, the maximum amount an individual could put in their pension would fall to £24,000, with the maximum basic rate tax relief falling to £6,000.
The provider notes that, if the annual allowance was cut in half, the lifetime allowance could not be reached even if the maximum was saved each year.
The annual allowance is seen as an easier target than the lifetime allowance.
Momentum Pensions UK head of sales John McCreadie says: “Abolishing the lifetime allowance would be popular with advisers but seems improbable.”