Britain was once affectionately described as a ‘nation of shopkeepers’. Our economy has long been propelled forward by the small entrepreneurs who choose to ‘go it alone’ selling their services and goods to larger businesses and the public and paying their taxes on the profits.
Many Chancellors of both political persuasions have historically recognised this – choosing to incentivise the sole trader or small investor. However, the previous chancellor (George Osborne) appeared to cosy up with the giant businesses at the expense of the ‘little guy’. Punitive tax penalties and regimes were brought in to claw revenues from the ‘shopkeepers’ whilst the super-national’s walked straight around the tax system.
Any hopes that George Osborne’s tax regime would end with a new chancellor were dashed today as Mr Hammond took to the dispatch box.
The key points of concern for our clients, both business owners and retired alike are:
The third concern is self-explanatory, but watch out for point two if you have taken pension benefits but continue to work and wish to pay into a pension in some capacity.
Point one is our most general concern as many of our clients hold investment portfolios that are not ISA or Pension wrapped. We call these Collective Investment Accounts. Clients with higher risk portfolios will not hold many income bearing funds, but lower risk portfolios are designed to reinvest income (dividends) as part of a more cautious strategy.
Under the current dividend allowance, it is still quite hard to exceed the £5,000 dividend annual allowance, you would need a fairly large collective portfolio. However, the reduction to just £2,000 could see many more clients being forced to complete tax returns. It also continues to hurt small limited companies where directors rely upon dividends.
Our advice at this stage is to talk this through with us and your accountant (if you have one) at your annual review. We will probably have to lean towards more ‘accumulation’ funds as opposed to ‘income’ funds in future which is a pity for our more cautious portfolios.
As always we are here for you 100%. If there is anything at all that you want to chat through, please let us know. With kind regards.
Darren and the team