Commentary on any budget very much depends on the organisation conveying their views…
It has been said that the only things that are certain in life are death and taxes. Inheritance Tax brings death and taxes together, as your assets on death are recorded, assessed and taxed according to the rules…..
I have just completed some work for the chairman of a local charity I am treasurer of, which raised a few issues about how you research your pension options. Having contacted his pension provider, he was just about to cash his main pension in when he read the small print on the pack they sent him. The elephant in the room for Pension Freedom is the tax due to HMRC if you take your pension as cash; the bill for him could have been enough to buy a very nice, shiny car!
As time goes on more and more estates are falling within the embrace of Inheritance Tax, with central government, (flagged by the Office for Budget Responsibility, OBR), expecting the tax take to go from £4.7Billion for the years 2015/16 and 2016/17 to £5.0Billion in 2017/18 and up to £6.2Billion in 2021/22.
Most financial planners, ourselves included, try to persuade clients to draw up wills and “Lasting Powers of Attorney”, as these are the building blocks for any realistic strategy to protect family wealth. Whilst Wills deal with our assets on passing, Lasting Powers of Attorney (LPAs) relate to decision making and mental capacity during your lifetime.
Notwithstanding politician’s promises and some jiggery-pokery around IHT on the family home the tax take on Inheritance Tax has been rising for some time. Back in 1980/81 the total IHT take was under £0.5bn, in 1990/90, it was under £1.5bn, in 2000/01 it was under £2.5bn, in 2008/09 is was over £3.5bn and in 2015/16 it was over £4.5bn. As a proportion of GDP, (Gross Domestic Product), in 1980 it was under 0.17%; in 2007/08 and 2015/16 it was over 0.25%, so its influence over government receipts has been rising significantly. (Original data from HMRC Tax & NIC receipts, monthly and annual historical record, 21st June 2016)
Now the Brexit result has been declared, we now have to deal with the consequences, which in the short term has been a devaluation of the Pound and a fall in the FTSE. Although the noise in the short term will make investments look riskier, the longer term prospects are probably not changed a great deal. Capitalism uses a process of creative destruction to move from one norm to the next, so a better question is who is likely to get damaged in the process.