Many of our clients and contacts will have seen the new Chancellor, Rishi Sunak, delivered his first Budget on the 11th March. This was less than a month after he was first appointed to replace Sajid Javid. The Budget was, of course, wide ranging. In this edition of our eNews, we just wanted to focus on some of the points that were relevant to the Financial Services industry and Chancellor’s (Financial Management Limited, not of “the Exchequer”!) clients. Saying that, with the COVID 19 situation continuing to develop and subsequent announcements by the Chancellor and the Government related to the economy, the announcements in the recent Budget now seem like old news to some degree.
In advance of the Budget, there were rumours (as there have been for many years now) about alterations to the ability for people to receive higher rate tax relief on pension contributions, but once again, the ability for some clients to receive tax relief of up to 45% on their pension contributions was unchanged. Saying that, in the true spirit of some previous Budgets and legislation, there were some technical changes to the amount of tax-efficient contributions that higher earners can make to their pension arrangements, due to the Tapered Annual Allowance. Essentially, from 2020/21 onwards these rules now only apply to those individuals who have what is known as a threshold income of more than £200,000 and what is known as adjusted income of more than £240,000. With one fell swoop, the Chancellor removed many people from the scope of this restriction. It was not all good news, however, in that the maximum tax-efficient pension contribution that may be paid by anyone who is subject to the maximum amount of tapering reduces from £10,000 to £4,000 for 2020/2021.
Another pension related change was the increase in the so-called Lifetime Allowance, in line with the Consumer Prices Index to £1,073,100 which is a relatively small increase from the previous level of £1,055,000.
One of the biggest changes announced in the Budget which could potentially affect Chancellor Financial Management Limited’s corporate client base is that the lifetime limit for Entrepreneurs’ Relief reduced from £10 million to £1 million. This is the total amount of capital gain that qualifies for a 10% Capital Gains Tax rate.
Many of our high net worth clients look to pay contributions to Junior ISAs or Child Trust Funds for their grandchildren. In a surprise move, the limit for both types of arrangement for the 2020/21 tax year was increased to £9,000 from its previous level of £4,368.
For our financial planning clients, the Budget was, therefore, fairly low key.
Whether you’re considering paying Junior ISA subscriptions for your family or trying to work out whether or not the new pensions limits will have an effect in your own particular circumstance, please do not hesitate to contact one of the Chancellor advisory team.