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2016 Budget Report

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2016 Budget Report

Thursday, March 17th, 2016

George Osborne delivered his eighth Budget on Wednesday 16 March 2016.

Although the changes affecting private pension scheme provision weren’t nearly as great as they could have been, there are still a number of important changes.

Read our summary of the Budget 2016

Tax planning: time to get ahead?

Wednesday, March 9th, 2016

As we near the end of the tax year, now is the time to consider not only year end tax planning, but also planning for the new tax year.

It is one of the features of the political cycle that the more difficult and less palatable legislation tends to come at the start of a parliamentary term rather than as an election nears. Tax changes are very much a case in point: the rises come soon after an election, the cuts shortly before the election. When 2016/17 starts there will be a number of important tax changes scheduled to take effect which need to be built into your financial planning:

  • Lifetime allowance The lifetime allowance effectively sets the maximum tax-efficient value of all your pension benefits. It started life in 2006 at £1.5m, reached a maximum of £1.8m and will be cut from £1.25m to £1m on 6 April 2016. It will be possible to claim some transitional protection, although final details are still awaited. 
  • Annual allowance The annual allowance effectively sets the maximum tax-efficient annual input to all your pension benefits, regardless of source. It started life in 2006 at £215,000, reached a maximum of £255,000 and is now £40,000. From 6 April 2016 a new tapered annual allowance will be introduced, which may affect you if your total income (not just earnings) exceeds £110,000. The taper will mean that your annual allowance could be as low as £10,000. 
  • Dividend taxation The new tax rules for dividends begin on 6 April. If your dividend income is less than £5,000 you will have no tax to pay, but if you have substantial dividend income – perhaps from a shareholding in a private company – then your dividend tax bill could increase. 
  • Personal Savings Allowance This new allowance will mean that if you are a basic rate taxpayer you have no tax to pay on the first £1,000 of interest, while if you are a higher rate taxpayer, then £500 will suffer no tax. In line with these new allowances, interest from banks and building societies will be paid without deduction of tax (but it will still be taxable).

If any of the changes gives you pause for thought, do contact us. Each one offers planning opportunities, not all of which are obvious.

The value of your investment can go down as well as up and you may not get back the full amount you invested. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

Three ways accelerated tax payments are likely to affect you

Wednesday, February 24th, 2016

George Osborne announced last year that the tax system as we currently know it will be phased out by 2020, after the Treasury described the system of tax returns as “complex, costly and time-consuming.” In its place, a new digital system will be rolled out by the government which purports to be easier to use and manage for both individuals and businesses. Whether or not that will be the case remains to be seen; what is undoubtedly true is that there will be some major changes in the way you calculate and pay tax every year. Read on to see what we reckon will be three of the biggest changes you’re likely to experience.

  1. Paperwork and forms will be replaced with online content and apps – the new system will sweep away the long-winded, repetitive and arguably antiquated method of filing your tax return with a contemporary approach, utilising the latest technology. HMRC’s website will be the hub for the new tax system, with individuals and businesses being able to use apps on smartphones and tablets. Whilst this marks a step into the 21st Century which many no doubt see as long overdue for a system which has remained grounded in old-fashioned methods for a long time, it’s inevitable that the government will have a task on their hands convincing some of the security and reliability of a completely digital system.
  2. Annual tax returns will become a thing of the past – with the digital tax system, an annual tax return will be phased out in favour of more regular returns on the money you’re earning. Predictions have varied from quarterly returns to monthly reporting or even “real-time” tax returns, but there’s no real way of know what the government will opt for until an announcement is made. The idea behind making more regular returns is that the system will become more accurate, saving the treasury time and money by becoming more efficient. The new system has also been presented as quicker and simpler for the taxpayer, although this again remains to be seen.
  3. You may see the changes sooner than you think – in its document ‘Making tax easier: the end of the tax return’ published in March last year, HMRC stated that, “by early 2016 five million small businesses and ten million individuals will have access to their own digital tax account.” Whilst no follow-up to this figure has been published, what is true is that the amount of people accessing their tax details and completing their return online is rising year on year. Whilst the new system may not be completely rolled out until 2020, it’s very possible that you or your employer may start using the digital tax process much sooner than that.

Four key things to do before the end of the tax year

Wednesday, February 24th, 2016

Whilst the cold weather and long nights might make the beginning of April seem a long way off, the final few months of the financial year always seem to fly by. It’s therefore a good idea to start thinking about the most important things to do before 5th April arrives and the tax year ends. To get you started, have a look through our top four tips for what to do to ensure you are making the most of your investment opportunities whilst you can.

  1. Use your ISA allowance – you can invest a maximum of £15,240 per year in your ISA. That amount resets at the start of each tax year, and there is no way of carrying over any allowance that you haven’t used. Simply put, if you don’t use it, you’ll lose it. Remember, if you have both a cash ISA and a stocks and shares ISA, the £15,240 is the total of the combined accounts. However, you can now choose how you divide the allowance between the two accounts, something you couldn’t do until a couple of years ago.
  2. Pension Contributions and Flexible Pension Preparation – it’s worth checking your pension contributions every year, especially towards the end of the tax year. Pension contributions can often be a sensible way to look after your tax liabilities, but don’t forget you should always do this whilst keeping in mind your full financial plan. You should also be mindful of the lifetime pension allowance, currently £1.25 million but set to be reduced to £1 million from April 2016. Any pensions totalling more than that amount can be subject to further tax, which may impact on your financial planning overall. Make sure you check the current size of your pension if you’re considering making additional payments, as you may inadvertently push yourself into a taxable amount if you’re not careful.
  3. Capital Gains Tax Allowance – a tax break seemingly destined to be overlooked by many every tax year, the Capital Gains Tax Allowance stands at £11,100 for the 2015/16 financial period. What that means is that all profits from investments, or the sale of property up to that amount, remain tax free. Don’t forget that this figure applies to each individual, so a couple can enjoy up to £22,200 joint Capital Gains Tax Allowance. Moreover, a legitimate gift from a spouse or partner does not count towards this total.
  4. Savings for your children – it’s remarkably easy to overlook the fact that your children can benefit from virtually all of the above. The allowance for Junior ISAs this year is £4,080, so make use of as much of that as you can before it resets. Capital Gains Tax Allowance is the same for children as it is for adults, and it’s also possible to set up pension contributions for them. All worthwhile ways to make the most of your tax allowances before the end of the financial year.

February snippets – you may have missed…

Tuesday, February 23rd, 2016

A selection of recent articles and updates which you may have missed….

Pension errors to affect over 2 million

Over 2 million people will be affected by errors in calculating their state pension, says the Mail. Their entitlements depend on the treatment of National Insurance contributions while they were enrolled in ‘contracted out’ occupational pension schemes. But there are many discrepancies between the NI records held by the pension schemes and those held by the Department of Work and Pensions, which has not helped matters by telling pension schemes in 2012 that they no longer needed to keep the data. A big data reconciliation programme is under way but it won’t complete until 2018 and in the meantime, says, the Mail, many people’s pensions could be out by £5 or more per week.

Wealthy to pay more for probate

Probate fees for the wealthy are set to rise sharply, says the Financial Times. The government has proposed major revisions to probate fees, which are currently £155 for people with assets over £5,000. Probate is required before inheritors can claim assets from an estate. The proposal is to raise the exempt limit to £50,000 and then charge fees starting at £300 up to estates of £300,000, but then rising sharply up to £20,000 at a level of £2 million.

Millions at risk of hefty pension penalties

Up to 2.2 million pension savers are at risk of having penalties applied to encashment of their personal pensions, says the Telegraph. Old policies issues in the 1960s and 1970s often applied penalties on encashment before age 65, and many people now want to access cash at 55 under the new pension freedom rules. The Telegraph cited the case of a 55-year-old business owner who wanted to cash in a £28,000 pension to finance her business, and was given varying figures by provider Aviva for the penalty that would apply, ranging from £6,000 to £10,000. Aviva eventually waived its penalty but many others in a similar position may not be so lucky.

The home of Mum and Dad

The proportion of young adults living at home with their parents has risen to its highest level for over 20 years, says the Mail. Back in 1996 55% of adults in the 20-34 year old age group owned their own property; today it is just 30%. That means one in four people in this age group today still live with their parents. Accumulating a deposit and qualifying for a large enough mortgage are the main factors keeping them at home.

Not many care about marriage allowance

Decried at the time as a typical Chancellor’s gimmick, the marriage allowance introduced by George Osborne has proved just that. Only 330,000 of the 4.2 million people eligible for the allowance have bothered to claim it, says the Sunday Times. In theory, if one of the couple have an income below the personal allowance  (£10,600 this year) they can transfer up to £1,060 of their allowance to their partner, who would then save just over £200 in tax. But the procedure and forms are complex, and the Sunday Times reported the case of a 77-year old who claimed HMRC did the transfer the wrong way round so he ended up paying more tax and it took him six months to sort it out.

Savers waste billions in unclaimed tax breaks

UK savers and investors waste £4.6 billion a year by not claiming obviously advantageous tax breaks, says the Financial Times. £1.9 billion relates to pension funds but another £1.8 billion comes from not making best use of ISAs. Transferring the maximum into ISA each year (£15,240 for 2015-16) reduces the amount of income tax payable on interest, dividends and capital gains.

Millionaires pay more tax

The top 6,000 taxpayers in the UK have been successfully targeted by a special unit within HMRC, says the Financial Times. Since it was set up in 2009 it has collected an extra £1.3 billion, and last year’s haul of £414 million was up 54% on the previous year. The top 6,000 UK taxpayers collectively pay between £3 billion and £4 billion a year in tax.

HMRC continues its winning streak

Wednesday, December 2nd, 2015

Last year HM Revenue & Customs (HMRC) gained new powers to demand that users of many tax avoidance schemes pay tax up front. This was a complete reversal of what previously happened, where scheme users would withhold any disputed tax payment until the protracted legal process had run its course.

In August 2014 HMRC started to issue notices to scheme users seeking “accelerated payment” of disputed tax. Thirteen months later HMRC announced they had sent out over 25,000 notices and collected £1bn. By March 2020 HMRC is expecting to have issued 64,000 notices and brought forward £5.5bn of tax payments.

Not surprisingly there have been legal challenges. Two film scheme users went to the High Court seeking a Judicial Review, but their case was rejected in late July. As the end of the tax year nears, HMRC’s success is a reminder that when it comes to tax planning, there is much to be said for using tried-and-tested plans rather than the more ‘exciting’, aggressive schemes.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

Autumn Statement 2015

Thursday, November 26th, 2015

Our guide the Chancellor’s Autumn Statement has been published and can be found here

Our latest newsletter

Wednesday, September 16th, 2015

Our latest newsletter has been published and can be found by clicking here.

Please don’t hesitate to contact us if you want further information on any of the topics covered.

Emergency Budget Summary

Thursday, July 9th, 2015

The Chancellor promised a radical Budget and we got one. But will it radically change the advice our clients need? The following summarises the changes likely to be of most interest to our clients:

Pension Annual Allowance cut for high earners from 2016 – get it while you can

Those with ‘adjusted income’ over £150k will have their Annual Allowance (AA) cut from the 2016/17 tax year, creating a ‘get it while you can’ pension funding window this tax year.

The standard £40k AA will be cut by £1 for every £2 of ‘adjusted income’ over £150k in a tax year. The maximum AA reduction is £30k, giving those with income of £210k or above a £10k AA. Carry forward of unused AA will still be available, but only the balance of the reduced AA can be carried forward from any year where a reduced AA applied.

The ‘adjusted income’ the £150k test is based on is broadly the total of:

  • the individual’s income (without deducting their own pension contributions); plus
  • the value of any employer pension contributions made for them.

The reduced AA won’t however apply where an individual’s net income for the tax year plus the value of any income given up for an employer pension contribution via a salary sacrifice arrangement entered into after 8 July 2015, is £110k or less.

More changes to come? The Government has kicked off a fundamental review of the pension tax framework to ensure it remains fit for purpose, and sustainable, for a changing society. In a consultation launched today, HM Treasury is seeking views on a range of very open questions around what changes (if any) would simplify pensions and increase engagement.

Other pension news

  • Lifetime allowance: The proposed reduction in the Lifetime Allowance from £1.25M to £1M will go ahead as planned from the 2016/17 tax year. It will be indexed in line with CPI from 2018/19. Details are awaited of a new transitional protection option for those with existing pension savings already over £1M who would otherwise face a retrospective tax hit.
  • Death tax: As promised as part of the ‘freedom and choice’ reforms, all pension lump sum death benefits paid after 5 April 2016 in relation to a death at age 75 or above will be taxed as the recipient’s income (removing the flat 45% tax that applies in the 2015/16 tax year).
  • Salary sacrifice: Despite wide pre-Budget rumours, there are no changes to salary sacrifice rules. The Government will, however, be monitoring the growth of such schemes and their impact on tax take.
  • Transfers: To improve consumer access to ‘freedom and choice’, the Government will consult about how to improve the pension transfer process and, potentially, cap charges for over 55s.
  • Annuities: The ability for pensioners to sell their annuities will be delayed until 2017. This allows more time to ensure the related consumer safeguards are in place. More details will be announced in the autumn.

Individual tax allowances

Both the personal allowance and higher rate income tax thresholds will increase over the next two years as follows:


  • Personal Allowance increases to £11,000;
  • Higher rate threshold increases to £43,000.

A basic rate taxpayer will be better off by £80. Higher rate taxpayers will be better off by £203.


  • Personal Allowance increases to £11,200;
  • Higher rate threshold increases to £43,600.

A basic rate taxpayer will be better off by a further £40, and higher rate taxpayers by £160.

These increases are on the way to meeting government pledges to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 during this Parliament.

New dividend allowance

The system of dividend tax credits will be abolished from April 2016. It will be replaced by a new tax free dividend allowance of £5,000. Dividends in excess of this allowance will be taxed at the following rates, depending on which tax band they fall in:

  • Basic rate – 7.5%;
  • Higher rate – 32.5%;
  • Additional rate – 38.1%.

This means that from April 2016, a basic rate taxpayer could have tax free income of up to £17,000 pa when added to the personal allowance of £11,000 and the new ‘personal savings allowance’ announced in the Spring Budget of £1,000. Higher rate taxpayers could have up to £16,500 (as the personal savings allowance is restricted to £500 for these individuals).

Certain individuals may also have savings income falling into the £5,000 savings rate ‘band’, currently taxed at 0%. There is no mention of any change to this band, in which case certain individuals may have tax free income of up to £22,000, depending on the sources of their income.

Making full use of these new allowances can make savings last longer in retirement and potentially leave a larger legacy for loved ones. And strengthens the case for holistic multiple wrapper retirement income planning.

Inheritance Tax: family home nil rate band – but not yet

The Government will introduce a new IHT nil rate band of up to £175,000 where the family home is passed to children or grandchildren. This is in addition to the current nil rate band of £325,000 which has been frozen since 2009 and will remain frozen for the next 5 tax years, until the end of 2020/21.

Who will benefit
The extra nil rate band will be fully available to anyone who:

  • passes the family home to their children or grandchildren on death; or
  • or had a family home, then downsized (passing on assets of equivalent value to children/grandchildren); and
  • has an estate below £2M.

However, the full £175,000 won’t be available until 2020/21. The allowance will first become available in 2017/18 at £100,000 and increase to £125,000 in 2018/19, £150,000 in 2019/20 and £175,000 in 2020/21. It will then increase in line with the Consumer Price Index (CPI).

Like the existing nil rate band the new property nil rate band can be transferred between spouses or civil partners. This means a married couple could pass £1M in 2020/21 to their children tax free on death provided the family home is worth at least £350,000, saving £140,000 in IHT.

Who may miss out
But not everyone will benefit from the additional IHT free allowance. Anyone with a net estate over £2M will begin to see their property nil rate band reduced until it is completely lost once the estate is over £2.2m (2017/18) £2.25m (2018/19), £2.3m (2019/20) or £2.35m (2020/21).

It will only apply to transfers to children and grandchildren. Meaning those without children will miss out. And it is not possible to use the exemption for lifetime transfers which may discourage some clients from passing on their wealth during their lifetime.

Clients who could benefit from the property nil rate band may need to revisit their existing wills to ensure they continue to reflect their wishes and remain as tax efficient as possible.

ISA changes

Replacing withdrawals
The proposed changes to ISA, allowing savers to dip into the savings and replace them without it affecting their annual subscription limits, will go ahead from 6 April 2016.

The new contributions would have to be paid within the same tax year as the withdrawal for it not to be counted. These new flexible funding rules will only apply to cash ISAs and any cash element within a stocks and shares ISA. However, it is now possible to move ISA holdings between cash and stocks and shares without restriction, so clients in stocks and shares will be able to benefit provided they move into cash first.

Buy To Let landlords – restriction on interest relief from April 2017

Under current legislation, individuals who use debt to finance the acquisition of residential buy to let properties can claim a tax deduction for finance costs incurred in servicing that debt.

From April 2017, tax relief for interest and finance costs will be restricted for residential buy to let individual landlords. The changes will not affect qualifying furnished holiday lets. The restrictions will be phased in over four years, resulting in tax relief only being available for finance costs at the basic rate of income tax (currently 20%) from April 2020. The restrictions will be phased in as set out below:

Tax Year % Fully Deductible Finance cost % Restricted to Basic rate of tax
2017/18 75 25
2018/19 50 50
2019/20 25 75
2020/21 0 100

With thanks to Standard Life technical department for some of the background. The value of tax reliefs depends on your individual circumstances. Tax law can change. The Financial Conduct Authority does not regulate tax advice.

Justin Urquhart Stewart talks to our clients and colleagues

Thursday, March 19th, 2015

We are very grateful to Justin Urquhart Stewart of Seven Investment Management for again attending our client evening last week and providing his expert insight on world markets and investments in is usual inimitable way.


We were pleased to also be able to arrange for Justin to talk to local 6th form students at Saffron Walden County High School in the afternoon and grateful to Justin for finding the time to do this.


A3This year we interspersed Justin’s commentary with wine-tasting from the various areas of the world that Justin covered in his talk. This was hosted by local wine expert Andy McGonagal. Our thanks to Andy for his wisdom.

Thanks as well to Linda Passfield for her superb catering!


We would like to thank those clients and local business people who attended and hope that you all enjoyed the evening.

Mike & Richard


Thoroughly enjoyed the wine, food, insights and company last night.  A well put together event and much appreciated. Paul – client

Thank you for Thursday night! It was a very entertaining and enjoyable evening…please pass our thanks on to your wife, partners and all the others whose efforts made the whole thing so worthwhile. Good stuff! John – client

Thank you so much for Thursday. Top night. Andy – solicitor

Thank you very much for a most enjoyable financial evening, especially with the wines and Justin Urquhart Stewart. David – estate agent

On behalf of Philip and myself we would like to thank you both for hosting a very enjoyable, entertaining and educational evening. Could you also congratulate your wife on a fabulous spread. Derek – client