Autumn Statement 2014 series: Could we see inheritance tax changes?
We have seen so many changes in the financial planning sector in the last two years – increases to ISA allowances, simplification of ISAs, simplification of pension rules, changes to pension drawdown rules and so on – that I would be very surprised if we see anything drastic from the chancellor in this Autumn Statement.
I applaud all of the above as they have given people more freedom over their financial affairs. What I would like to see now is some clarity and certainty on the rate of the personal allowance for income tax and the higher rate of income tax. We have been given some indication of what these will be in the short term, but not in the medium and longer term.
I think there may well be an announcement on inheritance tax. The chancellor has long had a target to push this from the current rate of £325,000 to £1million, so he may set out a timetable for that, which would of course do no harm in bringing a lot of grey-haired property owners out to vote at next year’s election.
Tackling tax avoidance
As ever, the chancellor will make noises about tax avoidance. The coalition government has already gone to great lengths to close down tax avoidance schemes, although there is still no clear definition as to what is meant by the phrase “tax avoidance”. I suspect there will be references to Luxembourg, Ireland and Holland, however.
Announcements can be expected on capital gains tax on UK properties owned by foreign nationals and tightening of principal private residence relief for those owning more than one property. The latter might be designed to counter Labour and the Lib Dems who are backing a mansion tax.
Don’t meddle with ISAs
One measure that has worked very effectively for wealthier individuals from a financial planning perspective is the £15,000 ISA allowance which has enabled a larger amount of cash and shares than previously allowed to be invested without incurring a tax penalty. I sincerely hope the chancellor does not make any changes that would reduce this valuable allowance.
The pension drawdown changes previously announced are likely to produce a win-win situation, allowing the government to generate tax revenues at a much earlier point than would normally be the case and allowing large sections of the electorate to gain more freedom. As the new rules have not yet been finalised, I expect he will make further announcements in this area.
This is the last autumn statement before the General Election in May 2015, so I do expect this and the Budget in March to be more politically charged than normal.
However, with a number of financial planning changes announced in the previous Budget still to be implemented, my overarching message to the chancellor is to not do anything else that’s too radical, even if it’s just for sanity of professional advisers like ourselves.
Graham Gordon is managing partner at Moore and Smalley and also head of the firm’s financial planning and wealth management services.