Wealth planning

Budget 2017: at a glance

Two of Cazenove Capital's Wealth Planners provide a summary of the key points that we believe may be of interest.

24/11/2017

Jonathan Brownlow

Jonathan Brownlow

Wealth Planner

James Gladstone

James Gladstone

Head of Wealth Planning

Before Philip Hammond gave his second Budget statement of the year, many commentators were speculating that he would make changes to tax rates, possibly addressing the dislocation between income tax and capital gains tax rates, and pension rules may be overhauled.

As the Chancellor closed his address, however, there was relief that it was a quiet statement from a private client perspective. Importantly, there were no changes to the headline rates of tax, pension tax relief and the availability of a tax-free lump sum at retirement.

Income tax

  • The income tax personal allowance will increase from £11,500 to £11,850 from 6th April 2018.
  • Progress towards achieving a higher rate tax threshold of £50,000, by the end of the Parliament, will continue, with the level of income from which the higher rates of tax will apply increasing to £46,350.
  • The dividend allowance will, as previously announced, reduce from £5,000 to £2,000 on 6th April 2018.

Capital gains tax

  • The personal capital gains tax annual exemption will increase by £400 to £11,700 for the 2018/19 tax year.
  • Trustees will continue to benefit from half of the personal exemption, and as a result their allowance will increase to £5,850.

Inheritance tax

  • The inheritance tax nil-rate band will not increase, and continues to be £325,000 for an individual.
  • The residence nil-rate band, an additional tax-free amount available when a main residence is passed down to direct descendants, will increase as planned to £125,000 from 6th April 2018.

Individual Savings Accounts (ISAs)

  • In previous years the annual ISA contribution allowance has increased in line with inflation for 2018/2019, but this will remain fixed at £20,000, the same level as 2017/18.

Pensions

  •  There will be no change to the standard annual allowance which remains at £40,000 for 2018/19, and no amendments have been made to the gradual reduction applied where individuals earn over £150,000 of income.
  • The lifetime allowance will increase as planned to £1,030,000.

Stamp duty

Much of the immediate post-Budget focus was on the Chancellor’s headline grabbing reduction to stamp duty for first time buyers.

With immediate effect, people buying their first home will pay no stamp duty on purchases up to £300,000. If the property purchase is for more than £500,000, however, there will be no relief and the full rates of stamp duty will be payable.

VCT and EIS

The Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) tax reliefs were introduced to encourage investment into early-stage and small fast-growing businesses.

Changes to qualification criteria for companies and funds wishing to secure VCT and EIS reliefs, outlined in the Budget papers, will likely reduce the availability of these investments and ensure that only those with the highest capacity for risk end up taking advantage of the tax breaks.

The 30% income tax relief available when acquiring qualifying shares continues, along with capital gains tax and inheritance tax benefits. The focus of reliefs will be on ‘knowledge intensive’ companies and those where there is a significant risk of loss of capital that is in excess of the tax advantage available. This will help ensure that investors do not confuse these high-risk schemes with being a pension alternative.

Investment companies

Corporate structures have, in recent years, been used by individuals and families to provide control and flexibility over their investments. The removal of indexation relief, which adjusts the base cost of an investment to account for inflation, will increase the amount of tax due when the company comes to sell investments.

This change, combined with the dividend allowance reduction, will increase the impact of double taxation for the ultimate shareholder, and may prompt a review of whether the corporate structure remains the most suitable option going forward.

If you would like to discuss how any of these changes might affect you personally, please contact us.

Author

Jonathan Brownlow

Jonathan Brownlow

Wealth Planner

Jonathan joined in 2016 and is a Wealth Planner, providing advice to clients on pension and tax planning issues. Previously he has worked at RBC, HSBC, and a privately owned wealth management firm specialising in advice to financial services professionals. Jonathan has 14 years’ experience, is a Fellow of the Personal Finance Society and a Chartered Financial Planner.

James Gladstone

James Gladstone

Head of Wealth Planning

James joined in 2012 and is a Wealth Planning Director, responsible for advising clients on pension and tax planning issues. James also manages the team of Wealth Planners. Previously he was Head of Financial Planning at UBS and Financial Planning Director at Rathbones. James has 15 years’ experience and is a Chartered Financial Planner. 

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.

Contact Cazenove Capital

To discuss your wealth management requirements, or to find out more about our services and how we can help you, please contact:

John Gordon

John Gordon

Business Development Director
Telephone:
john@cazenovecapital.com
James Gladstone

James Gladstone

Head of Wealth Planning
Telephone:
james@cazenovecapital.com