Investment Landscape set to Change
With the Conservative Party returning to power with a majority, I look at five areas of investment which will be affected by future legislation and decisions that were outlined in the Queen’s Speech. If you’re in the highest tax bracket you need to read this post.
European Union Membership
Europe is never an easy concept to get your head around, and arguably it is going to get more complicated as we get nearer to the referendum on EU membership promised by the Conservative party prior to the election. Warnings of leaving the EU have already surfaced from Airbus and Deutsche Bank, while JCB the giants of engineering strongly favour an exit.
Pressure is being applied from all sides as to when to hold the referendum, so at this moment the referendum date is unclear. From your point of view, uncertainty as to when hold the referendum may deter you from investing, and the result will affect your future decisions.
The Finance Bill spells out a ‘tax-lock’ which will legally bind the government in locking tax, national insurance, and VAT at its current rate until 2020. Not many would argue this is good news, but remember the government can increase more tax by changing pension relief, capital gains tax, and inheritance tax.
Tax-free allowance will rise to £12,500 under the Finance Bill.
One aspect of the Finance Bill to keep a close eye on is inheritance tax. The Conservatives promised to raise the inheritance tax threshold to £1,000,000 for civil partners and married couples. They also promised a transferrable residence allowance of £175,000. Many financial planners however, believe that this will be offset as the Conservatives have said this will be paid for by reducing tax relief on pensions for people earning more than £150,000.
As you can see, inheritance tax is set to become more complex.
As just mentioned pension relief is set to change. For those earning more than £210,000 the annual gross pension allowance falls to £10,000 per annum. As a result, bringing forward pension contributions so you still benefit from the 45% marginal tax rate could be a wise move. You can’t however, rule out the government back dating the change to the start of the tax year. Although an action of this kind would be unprecedented.
Clearly financial advice is needed.
As part of devolution agreements, Scotland’s tax powers are to set to increase with the country being able to set its own tax rates. Furthermore, English cities will be able to set their own housing and transport policies. This will affect the landscape of investment opportunities considerably.
Under the enterprise bill, red tape on UK businesses will be cut and improve business rates. According to the government, this will save UK business around £10 billion a year. Small and medium enterprises should benefit accordingly.
Sound Financial Planning and Wealth Management
With the investor landscape set to change considerably, now more than ever good financial planning is important. My award winning financial and wealth management services can help you make the most of your investments to provide the highest yield possible.
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