When it comes to potential tax changes, we have to be careful that we are not sucked into the whole world of what will or will not happen.
Increasing up to the first £10,000 of income to become non-taxable is brilliant. This is around £700 a year to a basicrate taxpayer and, on the face of it, is is terrific for tax, financial and cashflow planning.
But I am quietly confident that it will be more than wiped out by other increases in direct and indirect taxation that we will see in the emergency Budget on June 22.
An increase in VAT is in the wings. The rise in National Insurance, although it has been deferred or delayed, will also happen. There is also endless talk at the moment about where CGT will go. It is a given that it is going to go upwards. It is an easy one for a Treasury that is desperate for revenue.
We have also had it flagged that IHT thresholds will not increase so there has already been an increase in taxation.
We are already hearing about people who are desperately trying to sell properties before the emergency Budget.
This may not be the best thing to do. The tax changes may well be phased, they may be tapered in and not introduced at mid-night that night. There is also lots of tax planning that can be done to ameliorate that.
Indecent haste in changing, in particular the CGT rules, would be very challenging for a lot of businesspeople who are looking at their personal assets and the ageing population.
But I am very much of the school of be very careful before you jump. It is very important that you have the detail in front of you rather than trying to second guess what the Treasury or HMRC will do.
Of course, any changes will create opportunities. If there is a significant change in the tax treatment of CGT, I would suggest it would increase the interest in offshore bond planning, which still remains a very tax-efficient investment option for the right clients, not just the super-rich.
But I hope what does not happen is that we get this big belief that we pile back in to life insurance bonds where people go: “Use this bond. I am only going to charge you 7 per cent commission to do it but look at the tax breaks.” We have to be very careful but I think there will be interest in the use or potential use of bonds, particularly offshore bonds.
But if the news is grim, then any tax changes will require people to review their port-folios, whether they are share portfolios or unit trust/collec-tive portfolios, to ensure they are in the best position to deal with these tax changes.
Nick McBreen is an IFA IFA with Worldwide Financial Planning