I thought that Mr Sunak came across very well at the dispatch box today. If ever the BBC are looking for a bedtime story reader – they may just have found their man! This Chancellor could manage to sound enthusiastic and calming about the most dire of situations and personally I found todays budget very reassuring under the circumstances.
However, the crucial thing is to understand what decisions he has taken today that could affect our clients and their financial plans.
I was concerned that the Capital Gains Tax rules would be tightened as this would have had the most impact on our clients. However, there were no such announcements which was a relief.
Inheritance tax remains largely unaltered it would seem, and the Chancellor has chosen to freeze personal allowances for the next five years. This is actually a clever move as it doesn’t affect anyone at first, but then gradually increases their tax position as they earn more.
I think this sets the direction for this Parliament as being steadily focused on rebalancing the books of the treasury over the long run. Hopefully this calm approach will continue.
The freezing of the lifetime allowance for pensions is one to watch. If you have a total of pension incomes or pension pots that exceeds £1,073,100, you could be in for a heavy tax bill at the point of taking benefits or age 75. The lifetime allowance is generally calculated as a multiple of your pension income plus any personal pension pots. We do consider this situation for our clients in their annual reviews. Due to the allowance standing still, more people are likely to get caught and saving into pensions may become less attractive for some investors.
The big headline was the large increase in Corporation tax from 19% to 25% for firms making profits over £250,000 per year. This is actually not a high threshold for small to medium sized firms with multiple directors and it will most certainly put the squeeze on limited companies. However, I think it is just one of several painful tax moves that the Chancellor will need to make in the coming years to pay back the vast amount borrowed to save so many jobs from being lost.
This budget was generally excellent news for our clients. In the long run I cannot see how any Chancellor can avoid taxing assets at much higher levels to try and rebalance the economy. For now, it is important that we remain diligent and try to maximise the allowances available to our clients in preparation for a regime that seeks to tax capital more heavily.
As always, I am here for you if you need to check or ask anything. My very best wishes. Darren