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IHT left alone but Brown rattles rest of the industry

Last week, I asked a number of tax planners what they most feared in today&#39s Budget.

Without exception, they focused on inheritance tax – a decrease in exemption limit, abolition of potentially exempt transfers and a clampdown on insurance-linked avoidance schemes.

In the event, the first red-tie but, I&#39m sure, blue Y-front Chancellor this century left the existing IHT regime untouched. Indeed, he even increased the nil-rate amount from £215,000 to £223,000.

But, boy, did he roll up his sleeves to shake up the rest of the personal financial planning industry. Thirty days to bed and breakfast – no more leaving it to March 30 to advise clients.

Taper relief, at different rates for passive and business investors, for capital gains and a phasing out of the existing, probably too generous, retirement reliefs.

To those who have invested the maximum over the years in Peps and Tessas or even just in 1997/98 and 1998/99 (£36,000 per couple in Peps alone) will be given more – not only a 10-year guaran tee of CGT freedom and inc ome tax reclaims but also £7,000 each into ISAs in 1999/2000 and £5,000 a year subsequently.

Those who panicked into transferring Pep funds into life-company private portfolio funds will be regretting the decision.

PPBs, both offshore and onshore, will be visited with a deemed 15 per cent taxable profit charge each year.

At the end of the day, who is the real loser? It has to be the adviser who recommended an insurance bond linked to a trust relying on the exemption from tax on investment profits on the death of his or her client – the dead-settlor loophole.

From now on, this little planning dodge is out, unless the adviser could organise his or her client to die before Budget day.


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