The UK budget will take place on Wednesday 11 March 2020.
It follows the Conservatives winning a majority in the December 2019 general election and will be the first budget since the UK officially left the European Union on 31 January 2020.
Laurence Parry, tax partner at advice firm Kreston Reeves, said to International Adviser: “It will be a budget driven by the cold hard facts of domestic politics rather than an ambitious international outlook.
“The 11 March budget is likely to focus on domestic issues to reward and keep new Conservative voters happy. Politics, not economics, will be the theme.”
No change please
Tax changes have been a constant theme in previous budgets, which have made personal finances very complicated.
So, what does the industry want in the upcoming budget?
Phil Billingham, director at Perceptive Planning, said to IA: “We are in position to cope with complexity, it’s what we do, we’re all a bunch of nerds.
“We can understand that, but clients don’t. It adds to the noise.
“I think we’ve had too much chopping and changing. I think simplicity is good for consumers. It’s a clear message.”
Andrew Dixon, head of wealth planning at Kleinwort Hambros, told IA: “Simplicity and certainty would be welcomed by clients.”
IHT
One area that needs simplifying is inheritance tax.
Recently, a cross-party group of politicians said HM Revenue and Customs (HMRC) needs to completely overhaul the regime.
“It’s a very emotional tax,” Billingham added. “But the reality is relatively few people pay it. I think it’s always tempting to tinker with that.
“I’m not convinced that, for the vast majority of people, it’s a meaningful change by the time you have got your use of gifts or annual allowance, and then some sensible planning.”
QB Partners’ managing director, David White, and head of trust and estate planning, Bob Easton, told IA: “We believe the eventual changes to IHT could be as significant as to adopt some of the continental approaches which base tax on the recipient’s circumstances and tax brackets rather than the donors.
“HMRC might even abolish IHT altogether and tax assets received as income or capital in the year of receipt. Not so much of a reduction in tax take but a fairer redistribution.”
Easy win
Neil Jones, tax and wealth specialist at Canada Life, said to IA: “IHT and the rules around estate planning are ripe for change.
“We’ve endured countless rule changes over decades which have only served to pile more confusion on an already complicated market.
“Previous governments must be aware of the inefficiencies in the system, as two reports have been commissioned looking into both the reporting and how the tax actually works.
“The forthcoming budget would be an excellent opportunity to make some headway here.
“An easy win, by way of introducing simplicity, could be by just increasing the standard nil rate band by the residence nil rate band amount, removing the need for a residence nil rate band altogether.
“This would only have a minor impact on receipts and would provide efficiencies in administration making the whole area of IHT much simpler and easier to understand.”
Pensions
Another area of constant angst for clients and financial advisers is pension taxation.
There are constraints in place to limit what people can put in their retirement pots; namely the lifetime allowance and the annual allowance, as well as the taper.
“It makes pensions a bad thing and discourages people from engaging with it,” said Perceptive Planning’s Billingham.
Tom Foster, tax director at Lewis Brownlee, said to IA: “I don’t like the rules for calculating the pension annual allowance. I would like everyone to have the same annual allowance again, albeit perhaps slightly reduced.”
Andrew Tully, technical director at Canada Life, added: “The simplest option would be to have one contribution limit, the annual allowance, for defined contribution schemes; and one benefit limit, the lifetime allowance, for defined benefit schemes.
“In that way, we massively simplify the system, making it more straightforward for people to understand, and equally won’t penalise those DC savers who enjoy good investment returns.
“Pensions are currently anything but simple. As we introduce a new generation of savers to pensions through auto-enrolment, now is the time to tackle some of these outstanding issues.”
Non-doms
Taxation around UK non-doms was another lingering issue.
The cohort has been rather forgotten about since the Brexit referendum in 2016.
“What the non-dom regime really needs is stability,” Sophie Dworetzsky, partner at law firm Charles Russell Speechlys, told IA.
“A clear policy for the remainder of this parliament, such as continuing remittance basis availability, would provide reassurance to the UK’s non-doms that they are a valued part of the economy.”
Akin Coker, partner in the private client team at law firm Buzzacott, added: “Introducing some stability, and correcting some of the anomalies in our tax system, would go a long way in helping to show that the UK is serious about maintaining its place as an attractive location for global investment.
“For example, the government could amend the anomaly in the ‘protection’ rules for offshore trusts set up by non-domiciled settlors before they became deemed domiciled in the UK.
“It was intended that a tax charge would only arise when benefits were received from these protected trusts; however, under the current rules, disposals of certain offshore funds, which do not have reporting status, will be subject to an immediate tax charge.”
National wealth service
Overall, it is very unlikely that changes in the tax sector will be made to ease the burden for clients.
But, in a bid to ease the difficulty for the industry, Eddie Grant, divisional director for professional development at St James’ Place, told IA it would be “great to see the subject of financial education properly tackled”.
“The introduction of a type of ‘National Wealth Service’ offering guidance and education to equip people with the knowledge and confidence to prepare for their financial future, would help to fill this gap and would be a step in the right direction,” he said.
