Transcript

SUMMARY KEYWORDS

2024 Labour Budget, financial impact, income taxes, National Insurance, employers’ costs, corporation tax, dividend tax, capital gains tax, inheritance tax, business relief, pension changes, buy-to-let, stamp duty, unmarried couples, financial planning

SPEAKERS

Martin Stanley, Scott Gallacher

 

Scott Gallacher  00:00

Good afternoon. I’m Scott Gallacher. I’m one of the Chartered Financial Planners here at Rowley Turton IFA limited in Leicester. And thank you for joining us this evening for our webinar what the 2024 Labour Budget means for you and your financial future. Good afternoon, and thank you for joining us this evening. My name is Scott Gallacher, and I’m a Chartered Financial Planner at Rowley Turton IFA Limited this evening’s webinar is hot on the heels of today’s budget, entitled What the 2024 Labour Budget means for you and your financial future. So myself and my colleague Martin have been beavering way looking at the changes that we announced, reading some of the small print, and kind of work out what that the changes actually are, and what impact they may have on our clients. So just a quick agenda, just quick bit of housekeeping, introduction, and then Martin’s going to look at what’s changed, who’s been affected. He and I will give a bit of a conclusion about how we think this impacts people. Briefly touch on how early certain can help people. And then some time for questions answers. If you have questions during the webinar, could you just type them into the into the chat box or question answer box, and then we will basically go through them at the end thank you.  I say welcome and housekeeping. Microphones are muted and cameras are turned off so you can see us, and hopefully you can hear us, but we can’t see you. That’s good. So use the question answers feature to ask any questions. I’m going to endeavor to answer them as best we can. After the webinar, a recording of this webinar was sent to all attendees, so you will get a copy of that, and I’m going to copy the slides, and if you have any technical difference difficulties, please let us know in the chat. Standard caveats – this seminar is guidance only should not be taken as independent financial or legal or accounting advice such we accept no liability, etc. Just speak to us before doing anything. I think is the best advice there. So without any further ado, I’ll introduce you to my colleague, Martin Stanley. Thank you,

 

Martin Stanley  02:07

Scott, Scott, for that introduction. Well, my name is Martin. Welcome to this evening, and the budget has landed the most eagerly awaited budget for, I think, probably most of my career. It’s been widely built and widely twailed as a really important one, and they always say that, but this time, it really is true. I was just thinking as I was stepping up there. I might be making a little bit of a generalisation here, but perhaps this is one of those budgets where it doesn’t affect a lot of people a little, but it affects some people a lot. You might be one of those people, and if so, hopefully this will give you some pointers. So what I’m going to do this evening going to go over some areas of change. You’ll see them on the screen. There some broad areas. I’m going to do a whistle stop tour of what’s changed with some implications. I’m going to talk about people like you, business owners buy select landlords, perhaps, or just individual people with your your wealth and your finances in mind, how that is going to affect you. So without further ado, I’ll first slide is income taxes. Rachel Reeves and last week, Keir Starmer made a big deal out of making a big promise that income taxes for working people, however that’s defined, would not rise. And the line in the budget today was it was a promise made and a promise delivered. I think that was a line. And truth, they were to be no changes to personal income tax. And so the rate stayed active the same. Now it’s a bit of a cheat, because the allowances are still frozen. And what that means is that as your prices go up, and I hope as your wages go up, then you’re paying a little bit more and a little bit more tax, just because the allowances don’t also go up with inflation. Rachel Reeves, we did announce today that the Tory allowance freeze, which was until 2028/29 isn’t being extended, so that’s something so the analysis should start to move again in a few years time. So nothing changes there really, National Insurance, well, following on from no change for working people, yes, no changes to employees rates and the line using the budget was your pay slip next week will look just the same as last week. So there we are, but, and it’s a big but employers national insurance has increased. When you an employer pays an employee, the employee has to pay their tax national insurance, but also the the employer, the company, has to pay national insurance as well, was 13.8% now it’s 15% doesn’t sound like a lot, 1.2% but it’s quite significant. If you’re have a high wage bill, and for a lot of companies, the wage bill is the major component of their costs. There’s another thing as well, which is the earnings threshold. That’s the point at which employers have to start paying their employers national insurance. That’s come down a lot from £9,100 to £5,000 that’s another. £615 per employee. We think, I say we think, because I just want to say again, I think Scott mentioned this that we have had to look at this pretty quickly. It’s been a few hours since Rachel Reeves spoke, so you’ll forgive us. I hope, if some of these things are provisional, we’ll find out some of the fine detail tomorrow. I hope so. Those are two things that affect employers. So this will affect anybody out there with a business. One nice thing is employment allowance. That’s some of that National Insurance given back again to the company that’s gone up. So that’s that goes another direction. But overall, although employees, workers will not pay any more, employers will pay a lot more for employing people. This is extra taxes on employment.  Just at the bottom there. There was some speculation that employers might have to pay extra tax on making pension contributions for people, but that, thankfully, has not come about. So that’s something which we can ignore, right? That’s National Insurance. The next thing is those things which you have interested directors and employers, several aspects here. So corporation tax not changed. So that’s a sigh of relief for some people. Dividend tax, whether that’s for company directors or just people who hold shares, that’s unchanged. So that’s great. Employers, National Insurance? Well, I’ve just mentioned that that’s going up quite a bit, and that will be a burden for people who employ staff, especially those people who employ a lot of staff on fairly low wages. So one example that was mentioned earlier in the office was company like McDonald’s that employ a lot of people part time, perhaps on low wages, they’re going to have that sort of  £615 per person addition all the way through their employee bank. So that’s that’s going to be difficult. Also difficult for people like that and others, is minimum wages increased by a lot, 6.7% now, price has gone up a lot, of course, but 6.7% is so feels unlooked or by employers. At the moment, that’s another burden,right?  Two other things to do with directors and employers. I’m going to come on to these a little bit in a minute, but capital gains tax has changed, and that will affect any directors and employers and company owners out there who are thinking, due course, I will be selling my business. So we’re going to come to that in a minute. The other thing is business relief, which is through the inheritance tax. That is business owners who die whilst they still own their business, normally would expect their personal business not to pay inheritance tax, but that is changing. So any of you who own businesses, you should be listening up to these key things, which I’m going to come on to just in a moment. So here we are, then capital gains tax, everyone thought, and we were all right, the capital gain tax will be going up. The current rates for individuals paying tax on profits made from shares or other assets that they sell was 10% and 20% for high rate taxpayers, that’s gone up to 18 and 24. So quite a big increase.  Those of you who are buying to let landlords, or are familiar with buying and selling properties might recognize those numbers, because they are the same rates that currently apply to residential property, so second homes, so that’s now been harmonized with whether it’s shares or second homes or any other valuable assets that you might buy and sell and make a profit on. They’re now or 18% and 24% depending on how much your other earnings are. There’s a £3,000 allowance. It’s only £3,000 it used to be a lot more. It doesn’t help you a lot, but still, you can make up the £3,000 profit per year, or £6,000 for a couple, without having to think about capital gains tax. So that has a little bit of a little bit of help.  But the key thing is, is is those rates are going up. And I said in particular, this was going to affect people who are thinking about selling businesses, because those of you who do have business might be thinking, well, there’s a special, special deal for business owners, and there is, and there was, but it’s changing.  This is what we all still refer to in the office as entrepreneurs relief. It’s properly called business asset disposal relief. This is the thing that I’d say when you sell a personal business, the first million pounds is free of capital gains tax, and after that, you pay a lower rate. So the million pound is stayed, but the rate has gone up from 10% to 18% so matching the new capital gains tax rate for individuals now on that, it comes in over a couple of years, so you don’t need to go out and sell your business straight away. It’s going to be 10% for a little while, for a year, and then an interim period of 14%, so climbing up, and then it’s going up to 18% after that. So you’ve got two years in which to think about selling a business, or it goes up to that higher rate.  So this is a big deal for those people out there who own businesses, who are thinking, Well, you know, when I come to retirement, I’m going to be selling it on, either to the next generation of family, or to, you know, to another, to another business, you will be getting less for your money. But then, if you’re over a million pounds, you’re getting less for your money, and you might have to be thinking, Well, what’s my retirement look like? If you are thinking that that’s something which we help people with that advance future planning. So inheritance tax, this was widely trailed, something that was going to be looked at, and it has, indeed, but for most people watching this, it probably won’t affect you very much, because the main point about inheritance tax apply to most people haven’t changed, and remember, only a small number of estates actually pay inheritance taxes, fewer than people tend to think so. The bands have changed, being frozen at £325,000 per person. And then you also get another top up of £175,000 residential band, and that’s if you leave your home to your children or grandchildren. So that adds up to £500,000 per person, or a million per marriage couple as a marriage couple, that’s important point. We’re going to come to that in a minute. So the rate is your 40% which a lot of people think is too high, but that’s what it is Now, the next two points are big ones, unused pensions and death benefits from pensions are now going to be brought under the it regime from couple of years time. What does this mean? Well, at the moment, stocks and shares and properties and all the things that you own are potentially subject to this inheritance tax at 40% if you go over their limit. But pensions were special. If you had any amount of money in a pension, you could pass that on without any inheritance tax. That’s changing now. To a certain extent, pensions, the idea of pensions, originally, back in the midst of time, was that these were meant for income in retirement purposes, and that’s why the state helped you accrue it. You get tax relief, right? You get money back. The idea is the state helps you accrue the pension, and you use it for income in retirement, and you’re not a burden on the state when that pension is not needed anymore at the end of your life, or the end of your yours and your spouses or your partner’s life, then some people say, well, it makes sense that it then be subject to tax, but not until then.  Now, the key thing here is that when you die, yes, your pension can pass to your wife or your husband or your civil partner without any inheritance act. So that’s not changing. And so if you’ve got a large pension and you’ve counted on that to provide for you and your family, then it still will do so when the second person dies, though, then yes, inheritance tax will hit and the children won’t get as much, if that’s what your plan was. But one big thing here, which has been the cause of much speculation and anger and frustration, is that that only accounts for husbands and wives and civil partners. So those of you who have a perfectly great life with houses and children and life together that happen to be unmarried will find that when the first person dies, that pension, if it’s a large pension, and it’s subject to inheritance, act, might very well be slashed significantly. So this is very meaningful for people who are not married, partners who are unmarried, or people who are divorced, or people who had planned to leave their pension to someone other than a married partner. So this is a this is something to think about and the quick answer, but some people might be, well, we’ll just get married. That is an answer. It’s not the answer that we think should be the answer, but that’s something that you might want to talk to us about. So I said there are two big things. The next big thing is agricultural property relief and business property relief. Now that might not mean something to everybody, but what it basically means this is the allowance means if you have a personal company, your own company, or your land, really a farm, is the idea. Then, on your death, you shouldn’t have to break up your company just to pay inheritance tax. The idea is that otherwise, what that will break up small companies and come do never pass down the generations. Well, that was the idea. Now that exemption from inheritance tax is being limited. You still get the allowance on everything up to 1 million pounds. But if you’ve got a company worth more than a million pounds and you die whilst you still own it, then anything over a million is going to start being taxed, not at the full rate, at least it’s the half the rate, so that’s 20% but that still means that if you own a company worth, say, £2 million when you die, then the first million is tax free. The second million is taxed at £200,000. If it’s worth is £3 million or £4 million or £5 million, that the tax is a lot more, and not many companies have that much money in cash. So this is a really big thing, and we think in the days to come, this is going to be seen in the news and elsewhere as as a really key point, which is that this budget has attacked small and medium sized businesses and is risking a lot of those businesses being broken up on death and not being passed on. It’s going to really put a spoke in the wheel of what the Labor Party have hoped would be a budget for growth and a budget for business. This is something which needs to be thought about by any business owner, and if you’d like us to help you think about it, please get in touch. Moving on. So buy to let and second, property is an area that didn’t get as much notice in the budget, but there’s no changes to capital gains tax. They were the 18 and 24% higher rates, and the the other rates have been moved up to meet them, so they’ve now been sort of harmonized with other capital gains but there has been a change. Second property stamp duty. There was already an extra amount of stamp duty. Second property, buyers had to pay by select landlords and people who just had a second property, they had to pay an additional amount, but that additional amounts have been increased again from 3% to 5% it doesn’t sound an awful lot, but if you were in the middle of a transaction, because that’s effective from midnight tonight, Scott, is it way factory tomorrow, basically today. Then if you want to middle of that, you’re suddenly having to pay another, I don’t know, £5,000  or £10,000 in stamp duty that that’s potentially a big deal. And of course, this will affect both sides of the equation. People buying those properties will have to pay more sample duty, and so they’ll be looking for a discount on people from from whom they’re buying. So that will affect a couple of sets of parties there. So not a big change to buy to let holders, but there is that to think about, and it makes buy to let properties less attractive, and they’re already becoming less and less attractive, frankly, because of lots of extra rules are being brought in. Landlords of regulations that sort of are making extra costs in that area.  So pensions in general, we’ve spoken about pensions and inheritance staff. They’re just in general, pensions have not been changed as much as we feared they might. So the allowances, tyou’re allowed to pay each year, £60,000 pounds, which is a lot for most people, or or 100% net relevant earning. This is basically what you earn. So that’s not changed. The reliefs are unchanged. We get relief at our normal tax rate, so 20% or 40% or if you’re a big earner, then at 45% so that’s not changed. The tax free cash, everybody thought this might be attacked and changed. And some people were so concerned about this, they took out their one quarter tax free allowance in advance, just to beat the Chancellor to the punch. But in actual fact, you’re still allowed 25% of your pensions subject to an overall allowance which hadn’t changed. That’s £268,750.  But at the bottom, you can see that big difference, which I already covered, which is that death benefits, they are going to be subject to inheritance tax. So that’s relevant for especially people who can’t leave it to a spouse tax free.  Other points, I’m going to whiz over these quickly, non-DOMs, those people who are able to get a special tax deal because they originate from abroad. That’s all been abolished, that’s all being scrapped. Bags and booze, not much change, really. They’re going up, as they normally do. Sugar tax on I think this is the fizzy drinks tax. I think that’s the main thing that’s that’s been expanded a little bit, and the VAT on school fees. I think everybody knows that by now, this is private schools. Of course, they’re going to get more expensive.  So who’s affected? I’ve covered this, certainly to Reddy and sort of picked on sort of areas where you might be affected. But in summary, business owners, individuals and families, especially unmarried couples or single people and landlords. So just to recap on that, the business owners. This, really, this slide is that, well, what can business owners do? And the first thing, I suppose, is the extra cost that’s being imposed on especially the national insurance costs. Well, some employers will want to review their costs, especially the employment, and assess how profitable they are. So.  If you can, maybe you can invest in tech to reduce or save costs. And I suppose that a lot of business owners will factor this extra cost in when you’re rewarding your employees, awarding bonuses, pricing wage rises, that kind of thing. There are a couple of things you can do. The first one is fairly mining. Salary sacrifice is a way in which you can redirect or the way in which the pension contributions for your employees is directed. There’s a way to do it in which you can shave a little bit off the National Insurance increase. So that’s that’s something we can help you with. And some people, unfortunately, will consider an earlier exit than they otherwise would have done from their business. I said that the capital gains tax increases were phased over a couple of years. So if you thought, Well, damn it, I’ll bring it forward to next year, you could potentially save yourself a lot of tax. And if that’s something that’s in your mind already, that’s something to think about now. One thing to say is that despite the changes to inheritance tax, in fact, pensions aren’t a dead duck. They’re not a busted flush. They still do work for people saving for retirement, and they still do work for business owners. They still are a good way to move money from the business.  One of the things directors share protection with the IHT change. This is the principle that if you own a business with partners or CO directors, then if one of you were to pass away, the other people want to know that they can take ownership of your shares in an efficient way and a tax efficient way, in order the business just doesn’t flounder with someone else inheriting the shares. Well, the arrangements that go towards making that happen are based on there not being any inheritance tax due, so they would need to be reviewed. And again, that’s something if you’re a business owner, and if there’s more than one business owner, it’s not a sole owned business. That’s something you really must look at, and we can help you do that. So please let us know.  The next thing is family protection. Well, this is just inherent in tax or businesses, especially if you’re on marriage, you know, if the business becomes over that 1 billion pound I mentioned, if suddenly there’s tax being paid where there wasn’t going to be taxed before, then that will affect, potentially, your whole family’s financial future if you were to die. It’s no longer just a case of saying, well, the business will pass over, or the value of the business will pass over. You need to sort of okay, reassess and regroup and reconsider on that. And that’s the last point. How does it affect your retirement plans? Because an awful lot of people say, Well, look, my my business is my pension, and if it is, well, that might work very well. But you need to think about how the capital gains tax getting less for your business in future might affect that. Again, we can plan, help you plan for that retirement, individuals and families. God has many changes to individuals, but there are some capital gains tax what should you be doing? Well, good practice is always, and we always emphasize this at Rowley Turton, use your annual capital gains tax allowances if you got share portfolio or anything that isn’t in a tax free Isa, be canny, be sensible, and make sure you use little apps each year to stop it building up when you can put money to avoid future tax. So put it in Isa. And Isa is a fabulous invention. Investment bonds is something a bit more complex that we can help you with that as well. There are ways to put your money to one side and protect yourself from some of these taxes and pay today’s lower rates. So if capital gain tax is 10% today and is going up to 14 and 18% well maybe you need to think about, should I be doing things sooner rather than later?  Inheritance tax? Well, especially if you are in an unmarried partnership, or if you’re single or divorced, or you don’t have a spouse to whom everything is going to go look at your inheritance tax position that really needs to be reviewed. You might decide to make gifts. I think everybody knows that if you give gifts to family members, like children and relatives, then there’s a seven year clock until you save the tax. That might be a preferable answer to some of the ways in which people have planned for inheritance tax before, by using those assets which used to be completely exempt, so business relief and agricultural relief, things I mentioned, which are no longer quite as tax favored as they were, although you do still have advantages if you do find there’s going to be a problem and an inheritance tax bill to pay, you might look at having protecting that by having a life insurance plan to pay the tax so you know, it’s sorted, and that’s something we can help you with. It gives great peace of mind, and it’s sometimes fairly inexpensive, in order to say, well, I know I’m paying 20 pound a month, 40 pound a month, into a life insurance plan, but that will provide the money to meet this bill, so I’ve got it covered.  So a couple of point on pensions, they still work for you, despite the tax relief. Well, because of the tax relief, despite the what I’ve said about the inheritance act, disadvantages. Now. this is point that we’ve made on before about, Well, if your pension is tax free, don’t spend it. Spend everything else first, and then you’d be left with a tax free asset. Well, that’s no longer the case. So perhaps you might need to reconsider how you take your earnings, if you’re a person who has a pension and other assets, and you take your income in retirement from various sources in a way to maximize your your tax exemptions that might need to be adjusted.  Now, the last point there, I think I covered in the previous slide, which is that higher CGT if you’re a business owner, how does that affect your family’s retirement? Let’s plan ahead on that. Landlords. So well I mentioned that before, no capital gains tax changes for you. Stamp duty has gone up. Inheritance tax, inheritance tax on pensions that might have a knock on effect. You might think, when I’ve got my home, I’ve got a buy to let property I’m okay because my pension is outside of all that. Well, moving that pension in now might mean you have to reconsider the whole inheritance tax thing. So again, I do keep saying this, but we can help people in thinking about this, so please let us know. So conclusion, this is Halloween. It’s seasonally themed, but also it’s a bit of a fright night theme. You know, it’s a little bit terrible for some people to sum up in action to consider capital gains tax if you’re a business owner, especially exit early, rebalance portfolios, try and avoid those high rates. Inherent tax on businesses. You really need to be looking at wills, protections, how to structure the business so that doesn’t affect you as much. Pension contributions still work. But inheritance tax, especially for people who are not married, that inherits that position, something you need to think about a technical point is pensions, age 75 there’s a change in the way the tax free cash element works. So in general, we think now that if you’re coming up to age 75, and if you haven’t taken your tax free 25% already, you should probably do it at that point. So that’s something that we’ll be talking to all our clients about who are around that age, inheritance tax on businesses well again, review wills, protection planning, how the business is structured. And lastly, things apply to all of our clients. Whether you think you’re affected by this a lot or not, is check your overall position. We have a facility, and we do find it very valuable to model future scenarios and look into the future about how you’re not only now, but in five years time, in 10 years time, all through your retirement, in your life. And we can sort of put some figures around that and expectations and help you make decisions now. And by doing that, sometimes we’re able to show people that they’re in a good place, not all doom and gloom by know me, but we can help you. To do that, help you understand your overall picture, calculate how much you need and if there is a shortfall. Well, we can think about ideas. We’ll work in conjunction with your solicitor and accountant and those people who we work with all the time. And we can help you navigate what is a complex financial world. And at least a day anyway, it seems a little bit more complex.  So we help you enjoy your wealth. That’s a tagline. We hope we can do that despite changes, there are always changes, and there always will be. These are big ones, but in a year or two’s time, they’ll embedded in and we’ll know what we’re doing more, and we’ll look back, and hopefully we won’t think it’s too terrible. Lastly, this is an offer, just because you’ve attended the webinar today the principles of financial planning we operate in terms of long term planning and looking ahead and modeling and thinking about things. It’s covered in this book. It’s called enough. How much money do you need for the rest of your life? If you’d like a copy of that, we’d love to send you a free copy. So please email me, martin@rowleyturton.com or scott@rowleyturton.com and we’ll send you a copy. So I’m out of breath. Now, before we do questions and answers, I just wanted to invite Scott to pick up on any bits he think I’ve shortchanged or something he’d like to emphasise. So Scott, would you like to say something to our attendees today. Well, thank you, Martin. I think there’s some excellent coverage.

 

Scott Gallacher  29:04

I think Martin’s point about unmarried couples or leaving money to children rather than a spouse or civil partner is absolutely key. I was talking with client this afternoon regarding this, and there was couple of issues with this particular client. They were unmarried to teenage children. And currently there’s no IHT issues, because the house is owned jointly, and there’s a  £325,000 allowance. And to be fair, most of the money, like a lot of our clients, who are kind of growing the wealth, it’s in the business, which currently is IHT three, because it’s exempt, and it’s in pension funds because also inheritance tax straight. So the client is worth circa £2 million and fundamentally, does not have an inheritance tax issue. And which is really good, if we fast forward to the new changes, any growth in the business over a million is that is going  to be subject to 20% inheritance tax, because he’s not married. So it’d be leaving it to his partner. And so if that business is suddenly worth £1,200,000 straight away, that’s £40,000 inheritance tax bill. It’s first issue, and I’m on the pension which is equally worth best part of a million pounds. Then today there’s no inheritance tax on that. But tomorrow that will be £400,000 pound when the new rules come in from April 2027. So that is a huge difference to this client. So if he dies today, there’s a £2 million estate so inheritance tax to pay. If he dies in three years, then that inheritance tax bill is going to be at least £400,000 actually, with a house, but yeah, about £400,000 I think. So that’s a big change, and that’s going to affect his family’s financial position hugely. So that’s a huge factor. Let’s just check the questions one second. That’s the main conclusion. Hopefully found it interesting. We are doing this on the fly more than we would do normally, so I apologise, we’ll hopefully get the answers. Okay, oh, is there any live sound for speakers? I think we fixed that. That was a problem our end. So we restarted. So hopefully people have been able to hear otherwise. It’s been somewhat of a quiet seminar.

 

Martin Stanley  29:16

Richard. First question from Richard says, two years to sell a business before hitting the new high rate, CGT, I believe that’s two calories off tax years, yeah, from April. Yes. I believe it’s, I think it’s 10% till April, then I think it’s 14% the next tax year, and then I think we’re into 18 so don’t be it’s actually even two years. Think about that. So right, we need to check, but it will be tax years. Tony, hello, Tony, an old friend of the company. He said, Martin, how will the net pension fund after being taxed in your state at 40% be accessed by the deceased children. Will they be get out the net funds without any further tax, or still have to pay their marginal rate of income tax on any withdrawals? Thanks anyway. Well, Tony, you have a knack for asking question, which is a real Zinger there. Thank you for that. This is something we’ve been discussing this afternoon, and when they’ll still not completely sure on what we think is that the inheritance act we’re payable to begin with. So £2 million pound pension fund, for example, will pay £800,000 ax, and then the balance that amount, which is falls over the lump sum death benefit allowance, which amount it currently is, just over a million pounds, will be taxable, but below that amount, it will be not taxable in the children’s hands. So that’s the answer there, Tony. So inheritance tax is paid and the balance, some of it is tax free, but if it’s still a large amount, some of it will be taxable at the marginal rate of income tax, so the children’s own tax rates.

 

Scott Gallacher  31:13

The other point on that is, and the thing we couldn’t get to the bottom of, we were unsure of the interaction of the inheritance tax bill and the lump sum death benefit allowance. So we weren’t sure if the lump sum allowance was calculated first and then the inheritance tax came off it, which would be the worst thing, because that leaves a smaller pot for you, so you’ve actually stopped to pay tax sooner, if you’ve got decent sized pension pot, or if the inheritance tax was paid first and then the net pot was the bit that was calculated for Lump Sum Death benefit allowance. Is not sure the government know the answer, to be honest, having looked at the guidance.

 

Martin Stanley  33:19

We should say that some of the changes to the pensions are they’ve been phrased as subject to consultation period. So nothing is really completely confirmed yet, so we’ll let you know.  Next question is from Linda. Hi, Linda, you’re a client of mine. Thank you for tuning in. So Linda says, What happens if you die before age 75 does your daughter get the pension free of IHT and still free of tax liabilities? No, I think the situation there, Linda is that whatever age you die at, the age 75 thing doesn’t really matter anymore, for most purposes. That is so we think that if you have a large pension and you leave to your daughter, it will be added, notionally, to your other assets or other estate to see if you go over the IHD balance. So for example, if you had, if somebody had a half million pound house and a 600,000 pound pension, they’d have 1.1 million pounds, and that will be the amount that will be assessed for inheritance tax. So now, unfortunately, I think that will, that will get you later.

 

Scott Gallacher  34:24

That’s our understanding. All I’m saying is that this is a huge change, and that, yeah, previously, we were very keen on you would have a million pound of non pension assets, because for a married couple with children, that was in maximum, we could be brought an inheritance tax payable, and then you could have, say, half a million pound in a pension and pay no inheritance tax, as it stands today in our reading of the new rules, if you die after April 2027, with that same situation, a million pound house, savings, investments, etc, and a half million pound pension and married couple, leaving it all to children, our understanding is that that taxpayer is now 200,000 pounds. So that is a huge change. So we all need to think about that. Does that impact what we do? Do you want to arrange some life go to cover that tax bill? Do you want to just spend or enjoy it now, or spend or enjoy other monies? There’s a lot to play. This is, I think, in the time that I’ve been doing this job, I think this is the biggest attack on wealthy families, really, that they’ve seen. It’s brought a lot of things into inheritance tax that weren’t, I think, I don’t think that’s been picked up by the press yet. And the issue with unmarried couples in particular is definitely, I think that will be go under radar, but they use huge issues.

 

Martin Stanley  35:35

Stephen asked a good question, were changes made to VCT or aim investment? Yes, on VCT first VCTs of particular kind of team, venture capitalist, trust with special tax benefits. I had an email from a VCT company earlier today, which I must admit, I skimmed See, even so I’m not sure exactly we see. My belief is that they’ve changed, stay the same. Aim investments, just for people who don’t know, these are, this is the sort of the junior version of the stock exchange for companies that are a bit too small to go on the main foot seat. And owning those shares up to now has given you that business relief exemption I mentioned earlier, whereby if you hold them for two years, they’re inherently tax free, which is great, even though they’re risky for an investment point of view, being a tax free is great, but no longer. The exemption for AIM shares is still going to have some exemption, Stephen, but only half the exemption. So instead of paying 40% you will now pay 20% on that. We don’t think there’s any element of retrospection on that. So we think if you hold those aim investments now and on death, they will be considered for 20% tax unless they fall into one of your other already tax allowances.

 

Scott Gallacher  36:50

Yeah, I haven’t. We were hoping that if they did this, which it seems to have done, that there may have been a kind of grandfathering to say, Well, okay, aim investments you held, yes, they would be fine, and it only be no investments. We haven’t seen anything to say that at all. And therefore, in the absence of that, is things fair to assume that no it will affect all aim holding. So essentially, if you’ve got a million pound in aim shares, and we’re happy that they were actually exempt yesterday, then they will be effectively submitted to 20% inheritance tax moving forward. So that’s obviously a big change for anyone who’s structured their affairs in that way.  The

 

Martin Stanley  37:23

The last question at the moment is, how about jewelry or gold? Is it affected by IHT, well, yes, in actual fact, although people don’t often think about it, they think about the house and the pensions and all the investments, everything you own, even down to the contents of your sock drawer, technically, is subject to inheritance tax. So if you have something of value like jewelry, then yes, that is effective. I mean, in the real world, I think often in a family sense, that jewelry gets passed away and perhaps doesn’t get under the scrutiny of the tax man. But technically speaking, yes, jewelry or gold, or anything of value like that that you own, it all gets added up, along with everything else to pay inheritance tax on. So Just one final thing to say, which is level at really certain. We would like to think, Oh, no. Another question Gary. Well, we’ll cover York and Gary from close. Does the 1 million pound allowance on agricultural relief apply to each owner? So if there are three owners on a joint farm, do you get the 1 million pound per se to use?

 

Scott Gallacher  38:39

I would say almost certain, almost certainly. Yes. Body or body, almost Yes, per estate or per person or per owner, not for the thing. So, so when we mention a farm or a business, yeah, yes, if it’s 2 million pound business and there’s two owners, then that’s a million pound each. That’s less of an issue. However, of course, if it’s husband and wife, so the wife then dies and leaves it to the husband. He’s then got 2 million shareholding, which is obviously over the million. So when he dies and leaves it to the kids, he’s suddenly going to get an inheritance tax problem, and he didn’t have today, yeah? So even those don’t completely escape it, but also people still come in with questions. No more coming in. Thank you. Thank you. Steve. Good point to finish on a good point. Yeah, well, just before we do finish, just to say that Thanks for tuning in tonight. But if you’d like to have more information and sit down, have a cup of coffee and a biscuit or boardroom table for a no commitment chat to see how we can help you, we’d be thrilled if you’d give us a call. And if you’d like to drop us an email, Martin at roadie certain com, we’ll send you a free copy of the financial planning book, and we hope to see you in the office as clients at a future point, but for the time being, that’s us. We’re offered a quick drink. Yes, thank you. Thank you very much. Bye. Bye. You.