Brewin Dolphin Exeter reacts to the Budget

Tim Walker the Head of Brewin Dolphin’s office in Exeter said,

“Like a phoenix from the flames, Osborne’s policy sees the British pension rise from its deathbed, freed from fears over stealth taxes and over complication. This is a total game changer, and will result in the almost immediate death of the annuity – for which we have long called for. It is a huge change in the flexibility of the pension system, with lower taxes and higher lump sums. We welcome the fact that the government is willing to trust people with their own finances and await clarification on how the vast amount of necessary advice will be delivered.”  

“The Chancellor has removed the ‘nanny knows best’ aspect of the ISA – allowing a far broader range of products, and the ability to switch from shares to cash and back again. With a massive increase in the amount that can be sheltered in an ISA wrapper, as well as the inclusion of peer to peer lending and shorter dated retail bonds, the ISA is now a far sharper tool in the tax planning toolkit.“

“Given the importance of retired individuals to Devon’s economy we expect these changes will have a local impact. We also expect to see a significant rise in the demand for advice on how best to benefit from the new rules.”

www.brewin.co.uk

The big budget decider: Can the Government afford the nation not to save?

 Our panel of experts will be tweeting and commenting throughout the Budget on 19^th March from @Brewin_Guy

Wealth manager Brewin Dolphin unveils its budget predictions

A key focus of this year’s budget is likely to be pensions and the increasing demand for reform in the annuity market. Nick Fitzgerald, head of financial planning, said, “We are always busy with pensions in the approach to the end of the financial year, but this year we have not noticed a discernible increase above the usual, of clients rushing to top up their pension pots.

“The world of pensions is increasingly less certain with a loss of trust in the stability of the regime. Over recent years we have seen a constant nibbling away at the incentives to save; reducing lifetime allowances; a fear of means testing for the state pension; investments in pension funds no longer receiving dividend tax credits – which were a huge incentive in the past; and now more and more pension savers are paying higher rate tax in retirement. Altogether, these changes are making ISAs a more attractive long term savings vehicle.

“There is a growing fear that pension savings are an easy target for stealth taxes. A commitment from the government that pension reliefs will not be tinkered with for the lifetime of the next Parliament would help restore trust, especially in the face of Labour’s intention to restrict higher rate tax relief - costing pension savers an estimated £1 billion per annum.   If we are to avoid seeing further erosion of pensions, we must regain confidence in the Government’s intentions on incentives and also push hard for reform of the annuity market.”

Members of the Brewin Dolphin team have given their key predictions:

PENSIONS

Richard Harwood, divisional director financial planning - predicts:

·         Restrictions on some of the more esoteric investments that can be held in pension schemes.

·         Possible new limits to pension tax relief that may hit the ‘squeezed middle’

·         Announcement that small pension pots – say <£40k – will no longer be forced to buy an annuity

“The government has put in place measures to further limit tax reliefs to those thought of as wealthy.  It would seem that there is political will to restrict tax reliefs so the limits may be tightened further in future, but there is a danger that these will again hit the ‘squeezed middle’”.

TAX & NI

Guy Foster, head of portfolio strategy - predicts:

·         A clear political and economic rationale exists for raising the national minimum wage beyond the 3% recommended by the low pay commission, although the likely casualty of such a move might be further advances in the personal allowance.

·         The distinction between income tax and NI is now so blurred as to be meaningless and this nettle needs to be grasped.

Guy Foster commented, “Mr Osborne has been quite clear about the type of budget he is planning. Large scale giveaways aren't justified by either the political or economic cycle this year.  Even as inflation falls, however, the accumulated decline in real incomes from rising prices and stubbornly inert wages remains a hindrance to economic prospects.  A big issue therefore is what he may do for the low paid.”

VCT & EIS

Richard Harwood, divisional director financial planning - predicts:

·         Possible increase in investment limits for Venture Capital Trusts and Enterprise Investment Schemes.

·         Further tweaking of the rules to ensure that eligible investments are not just tax-relief schemes.

“Increasingly EISs and VCTs are providing funding for businesses that would traditionally be the domain of banks.  But we would not be surprised if there was further tweaking of the rules on what investments are approved in order to ensure that there is true risk within the plans and that they are not just schemes to maximise tax reliefs.”

TAX AVOIDANCE

Richard Harwood, divisional director financial planning - predicts:

“This continues to be a priority and any victory in court for HMRC is strongly publicised, so we should expect the closure of perceived loopholes to be highlighted.”

ISAs

Rob Burgeman, divisional director predicts

 “We would welcome a commitment from the Government to ISAs as a core long term savings vehicle for UK citizens.  Speculation is building that there may be changes here and the uncertainty is most unwelcome and destabilising at a time when every encouragement should be given to those seeking to ensure their long term financial security. Any restrictions on ISA savings will drive the spare savings flow into the already overheated property market.”

CAPITAL GAINS TAX REFORM

Rob Burgeman, divisional director predicts:

“Greater simplification is required over CGT, especially as savers are now being taxed on inflation since the indexation of book costs was removed. How long before we will see fair differentiation in the taxation of short term speculation and long term investment?”

www.brewin.co.uk/exeter

Matthew Melksham Corporate Manager Haines Watts N. Devon gives his view on today's budget

 The Chancellor spoke for 55 minutes in total giving his fourth budget, the key points for our clients are:

·         Personal allowances to £10,000 by April 2014 - No income tax to pay on the first £9,440 earned from 5 April 2013 & rising to £10,000 from 5 April 2014. This places cash back into the hands of the lower paid in society and so will help disposable income.

·         Reduction in top rate of income tax down to 45% – From April 2013 the highest rate of tax will fall from 50% to 45%, this was one of the government’s policy promises.

·         Small Employer Allowance -  From 1 April 2014 employers will have not have to pay employers tax for the first £2,000. This means that a business can employ either 1 employee on £22,000 or 4 staff on minimum wage and not pay any additional tax. This should help start up businesses and those wishing to take on that extra member of senior staff.

·         Helping hand for the house market – There is a raft of measures to encourage people to buy new homes including a government backed guarantee so home owners puts 5% in and then the government pays 20%. This makes financing the purchase of new homes more affordable and achievable.

·         No rise in fuel duty – The expected rise in fuel duty of 1.89p has been scrapped, fuel is a large cost for employers and employees and so not to having to find this rise is good but not a real term saving for our clients.

·         Single rate of Corporation tax – In April 2015 the rate of corporation tax will reduce to 20% making it the joint lowest in Europe. This continues to make it potentially tax advantageous to be a company rather than trading in other business vehicles.

·         Tax free child care – This is to be phased in from Autumn 2015 and will give a tax credit for up to 20% or £1,200 of childcare costs per child. This is trying to make it pay for people to return to work and cover the ever increasing cost of childcare.

·         Access to finance – Extension of the Enterprise Finance and Enterprise capital fund should bring further access to business angel lending.

I see this as a mixed budget with growth being downgraded but with some ideas on how to try to get the local economy going. In North Devon we need more people with disposable income to help our retail sectors which have faced a tough few years, plus the additional shot in the arm for house building could help kick start our local economy.

If you want to know what the budget may mean to you please do just give me a call in the office.

http://www.hwca.com/accountants-north-devon/

Matthew Melksham
Senior Manager Direct Dial: 01237 428 213
Mobile: 07775 921 702

	North Devon Telephone: 01237 471 736 Sully House, 7 Clovelly Road Industrial Estate Bideford, Devon, EX39 3HN

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