Once upon a time, the government’s Autumn Statement only dealt with the country’s economic position and strategies to improve it..... and it was called the 'Pre-Budget Report'.
Now it has become an intrinsic part of the overall Budget process and gives the government a chance to unveil some of its proposed tax changes within the context of the overall economic strategy.
Whilst there will, inevitably, be new proposals made in the Budget 2016, the Autumn Statement contains information on tax and pensions proposals that is important for financial planners to know. With the government still under constant pressure to improve public finances, (and the climb down on tax credits and the increases to the defence budget increase the difficulty of this challenge) the importance of taxation to the overall "business plan" of 'UKPlc' cannot be underestimated.
The Chancellor's Autumn Statement focused, in their words, on "protecting economic and national security".
One of the most talked about highlights was the rebuttal by the House of Lords of the tax credit reforms which in effect forced the Chancellor to hold back his plans in this area. Commentators believe that the proposed tax credit cuts will somehow be clawed back with the implementation of universal credit. Whilst the income threshold for tax credit taper remains unchanged at £6,420 , one wonders how this taper will be effected with the new digital proposals for collection of taxes , designed to bring tax receipts forward but could also trigger the implementation of the taper before a complete trading/ reporting year.
There were no details from the pension tax relief consultation so we suspect a late night on Budget Day in 2016.
There were of course many other highlights for financial planning and wealth management. A full copy of the HM Treasury Spending Review and Autumn statement is available to download at the bottom of this article.
But for now...
Capital Gains Tax
Buy to Let
In addition to the changes in the taxation of the rental income from buy to let properties, anyone wishing to purchase a residential property for investment or a second home will need to pay additional stamp duty at 3% above the current Stamp Duty Land Tax rates. This comes into effect on 1st April 2016.
The higher rates will not apply to companies or funds making significant investments in residential property. The government will issue a consultation on the policy detail.
Tax Avoidance Evasion and Compliance
The government will introduce a new penalty of 60% of the tax due to be charged in all cases successfully tackled by the General Anti Abuse Rule (GAAR) and will make small changes to the GAAR’s procedure to improve its ability to tackle marketed avoidance schemes.
Tax administration - Making tax digital
The government will invest £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account, reducing errors through record keeping. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology.
This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year. The government will publish its plans to transform the tax system shortly and will consult on the details in 2016.
This will also bring the receipts of tax forward but one wonders how this will impact the self employed in receipt of tax credits. Will it bring the level of income for tax credit taper, currently £6,240, forward meaning that self employed people could loose their tax credit mid accountancy period.
And finally ..... more details are expected soon on a number of measures that were announced by the Chancellor in the July Summer Budget, but which were not mentioned in this Spending Review.
If you would like a review of your personal circumstances and weather you are investing in a tax efficient way ( and I emphasise tax efficient not tax avoidance ) ensuring you are utilising your reliefs, your investments are performing as expected and your financial plans underpinned with adequate protection - please do not hesitate to get in touch. You can use all the contact methods at the top of the web page or just complete and enquiry form below.
And don't forget your free downloads
As we approach the fireworks season here, I've been reflecting on some fond memories of times spent in Malta and in particular at the village festivals. These events would be dominated by rival marching bands, who would start their journeys at opposite ends of the village. Their eventual union in the village square would trigger mayhem, celebrations and of course fireworks. Except the fireworks were a real disappointment, one huge seismic upfront bang with a trail of smoke and then nothing .... finished.
That was a good couple of decades ago. Valetta, the capital of Malta, now hosts a two day International Firework Festival every April. The the rivalry is amongst local firework producers with the aim to create a memorable, noisy but importantly adding colour and sparkle to the experience.
So what's all this got to do with financial planning.....
Here are five ways in which the life insurance companies have used rivalry to evolve and give you more bang for your buck.
1. Full corporation tax relief. Jerry Bayman former head of Business Protection at Bright Grey are credited with developing "relevant life policies". By exploiting legislation from the 2003 Income Tax Earnings and Pension Act, small limited companies can now provide life assurance to directors and key employees by way of death in service benefits, with full corporation tax relief, no interference with the pensions lifetime allowance and without inclusion as a P11D benefit in kind.
2. Free weekly cinema tickets, coffee and iTunes. Vitality Life, the rebranded collaboration of PruProtect and Discovery Life in South Africa, rewards its policy holders who engage in their health. Discounts on bikes, discounted health checks, free weekly cinema tickets, coffee and iTunes are some of the rewards available in return for exercising and getting regular health checks. Full use of the rewards may be greater than the actual premiums you pay.
3. Children's cover I can't be sure, but I believe BUPA were the first company to offer children's critical illness cover as an additional definition, warranting a payment under a critical illness policy. Payment is a percentage of the overall cover, is paid as an extra which leaves the policy owners cover intact. BUPA subsequently merged with AXA Life who then merged with Friends Life. We've recently had a successful payment for a client, who's daughter is now recovering from hydrocephalus.
4. 24/7 Health Support Line In conjunction with my network we are very proud to offer this service from Red Arc for free, at the point a client needs it and for as long as they need it. Losing someone you love, being diagnosed with a critical illness or suffering an injury that prevents you from working can be made easier to bear when there is expert advice and a listening ear. As well as taking care of financial aspects we want our clients other worries looked after. The service is run by Red Arc for all clients, independently from the insurance companies.
5. Rehabilitation Cover It was possibly Friends Life who first offered this as an integral part of their income protection cover. Its not often published but it makes sense really for an insurance company to do everything they can to help get someone back into work after an illness or injury. It reduces their claims payment but importantly lets clients get back to work and enjoy life.
The price rivalry with life assurance, critical illness and income protection is over and all companies now publish their claims statistics online.
What counts now are the "add ons" to the policies. I haven't mentioned them all and I haven't even mentioned the importance of trust documents ( that can be saved for a later post ) but this is where an adviser with enthusiasm and knowledge of the different policies out there, can really make a difference.
An adviser will listen to your needs and goals and help you navigate the various company propositions and importantly will be around to help any clients through a claims process.
Its not about price anymore, it's about quality of experience and securing our clients financial future in the best way possible. So
So, if you've got a policy in a drawer, a carrier bag or shoe box in the cupboard and you are not sure if it is a banger or a damp squib please don't hesitate to get in touch and take advantage of a review "on us".
Enjoy your fireworks
Whilst reading the blog articles please be aware of the following:
Welcome to the blog curated by Jill Turner. The pages are not intended to give advice, they are just the real life stories from a real life financial planner and the wonderful people I get to meet.
I want the pages to be engaging, informative and purposeful.
The information contained within this blog is based on our understanding of current government proposals and tax
law, both are liable to change in the future.
Jill Turner is a member of the Personal Financial Society