We are now less than a week away from any proposals by the Conservatives and it will be interesting to see where they intend to make savings that will affect clients.
The major changes are the likely amendments to Capital Gains Tax in terms of relief and possible tax allowances. If changes are made to stop the ability to roll forward tax on capital gains by investing in certain investments this may also bring in extra revenue for the treasury. Clients and advisers need to be careful that they do not rush into decisions but also should consider the what if scenario.
Pensions may suffer another blow if higher rate tax relief were to be removed further. With the very low annuity rates that are currently acailable the ability for those nearing retirement, the chance to enhance their pension funds and income quickly would be restricted again. Predictions are stating that they believe the taper relief level will begin at inmcome from £100,000 from next tax year. This would restrict the ability for paraplanners and financial advisers to help clients use their pensions to reduce the high taxes paid by those earning in the £100,000 to £113,000 tax bracket.
Many financial adviser clients decry the low income they are quoted now and so the ability to increase any fund values by making contributions is vital. If any income tax rises occur these will also affect pensions in payment, which if were recent annuities would suffer a decrease in net payment.
There maybe some positive news if the requirement to force individuals to begin drawing an income at age 75 comes closer, and this will also though likely signal the demise of Alternatively Secured Pension Planning (ASP). Again if clients are about to purchase an ASP because it is their only option they need to consider whether it would be wise to delay a decision until after the budget if time allows this.
On the subject of fees any increase in VAT will also increase the cost of advice and with a move towards products that have VATable monthly fees will again make inrodes into clients returns at a difficult time in the market.
The expected reduction in child tax credits also means that those who have clients who use this income to save for their children may have to find additional money from their income to top up these payments.
