We had been warned. The alternative to the ‘trickle down’ Truss-o-nomics plan would be a ‘Hunt’ on taxes and savings.
The devil is always in the detail with these budgets, and one persons ‘horror’ can often be another persons’ slight ‘inconvenience’.
To this end, the first thing that I would say is don’t panic! The whole art of financial planning is to firstly gain all of the knowledge and then seek creative ways to legally comply with any new rules. In the case of this budget, I reckon we will need time to consider each individual client’s position – so no knee jerk reactions from us!
The big question I always ask after a budget, is ‘what does this mean for my clients?’
Today’s budget almost certainly means that you will be paying more tax from April.
Many of our clients will hold a CIA (Collective Investment Account) which we will have been diligently ISA wrapping each year with their approval. These CIA’s have been incredibly tax efficient, gaining from a small annual £2,000 dividend allowance and a fairly generous £12,300 Capital Gains Tax (CGT) allowance. We have been able to really maximise the effectiveness of these rules within our planning for clients.
Mr Hunt’s announcement that he will be slashing the annual dividend allowance to just £500 and the CGT allowance to just £3,000 from April 2024 is sobering. This means that just about anyone with a CIA will end up needing to complete a tax return – and paying tax where they previously didn’t have to.
These will likely be small amounts of tax for basic rate tax payers – our concern initially is more about the ‘hassle factor’ for clients.
There will be things that we can do to help mitigate this problem – such as introducing our clients to a reputable Accountant, producing annual tax reports with the help of investment platforms, ISA wrapping every possible penny within a CIA or even potentially moving the CIA to a different type of investment.
At this moment in time, the details are very sketchy and so we will need some weeks to consider everything, take advice ourselves and be able to then steer each clients’ plan in the right direction.
Keep an eye out for more communications from us in this regard.
As always, we are here if you have any concerns or questions. Ultimately, if we are paying tax then we are making money – and that is always a good thing!
This article should not be relied upon as tax or financial advice and the details within it may change as more information becomes available. It is intended solely as an initial reaction to the budget – considered from our clients’ perspectives.