Brewin Budget Response
Posted on the 9 July 2015
A Budget that walks the tightrope between spending cuts and economic growth
Stephen Ford, Head of Wealth Management, Brewin Dolphin.
“It is another ‘Budget for Growth and Business’ that Brewin Dolphin broadly welcomes. The Chancellor has again walked the tightrope over the gaping political chasms of distinct and competing ideologies.
“Osborne’s ‘Security First’ Budget carefully walked a tightrope, balancing carefully-considered welfare cuts with the introduction of the living wage – a final rabbit out of the hat.”
Key points on tax, savings, pensions and investments:
• Inheritance Tax (IHT) – the current tax-free threshold to be lifted to £1 million for the estate of a married couple or registered civil partners.
• Pensions tax relief – a reduction in the amount of tax-relief for those earning more than £150,000 from April 2016.
• Buy-to-let – restrictions on mortgage interest tax relief for wealthier landlords, from 40% and 45% to 20% by April 2020.
• Pensions – a Green Paper on proposals for radical changes that could see ISA-style pensions.
• Non-doms – permanent non-domiciled status to be abolished in 2017.
• Dividend tax – dividend tax credit to be replaced by a new £5,000 tax-free dividend allowance for all taxpayers.
• Corporation Tax – will be cut to 19% in 2017 and 18% in 2020, sending out a message Britain is open for business.
Brewin Dolphin’s insight on the changes and their impact
Stephen Ford, Head of Wealth Management
“Delivering a manifesto pledge on extending the IHT threshold and cutting perceived welfare state generosities wasn’t going to be an easy task, yet by manoeuvring to deal with the wealthy segments of non-doms and landlords, and telling the world the UK is open for business with low Corporation Tax, he has safeguarded NHS funding and provided for a higher standard of living for those wanting to work.
“We welcome the lower dividend tax, and will watch closely as the debate regarding long-term savings in pensions and ISAs develops.”
Nick Fitzgerald, Head of Financial Planning
“Whilst the well-touted IHT change will be welcomed by the Tory voting electorate, paid for by restricting pension relief for high earners, Osborne dodged an opposition bullet by refusing (at this stage) to reduce the highest rate of income tax.
“Cracking down on apparent inequalities in the non-dom and buy-to-let regimes, he hoped to demonstrate that the benefit cuts, which civil servants and policy advisers had prepared behind the scenes, were purposefully set-out. Free child care and the National Living Wage were introduced to help those wanting to work, and small employers benefitting from reduced National Insurance, will be happy along with the wider business community, when corporation tax becomes the lowest in the G20.
“We may have been able to wait until the Autumn Statement for these policy updates, but with a five year fixed Parliament, Osborne wanted to show he is on the ball, and clearly didn’t want to waste precious months delivering his growth ideas.”
Jo Jackson, Head of Financial Planning, Newcastle
“Osborne must enjoy this malarkey. Definitely more Summer Budget than Emergency, judging by some of the excitable MPs’ behaviour, he set out five or six key policy changes, with IHT, non-doms, buy-to-let, pension relief, Corporation Tax and the welfare state, all jockeying for headline position in the morning papers.
“Indeed, the Chancellor seemingly hasn’t had his appetite for pension evolution whetted enough yet. More far-reaching pensions and long-term savings consultations to come. Yes, really.
“So, pity the poor, tax-evading, high earner contributing to pensions, having a few buy-to-let properties, considering applying for non-dom status, and enjoying chunky dividends who may be a little aggrieved, but grateful that at least a Nil Rate Band extension has been given. Osborne has adopted a carrot and stick approach, helping those wanting to work and generating enterprise, and looking less favourably on others.
As his Stamp Duty reforms took the wind out of Labour’s sails last year, the opposition may feel peeved that he has capitalised on their non-dom curtailment too.”
Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation, which are subject to change.
The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.
The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.