Emergency Budget offers platform opportunities for advisers, says tax expert
The proposed changes to CGT, Income tax, pensions and inheritance tax commended to the House at the Emergency Budget last week present platform-enabled financial advisers with a wealth of financial planning opportunities, according to Technical Connection.
Speaking at a Cofunds hosted webinar on the subject, Technical Connection’s Tony Wickenden and John Woolley stressed that the implications for advisers in financial planning terms are significant. They highlighted for special attention the following tax changes which present financial planners with client servicing opportunities:
-A new 28% CGT rate for disposals made by higher rate and additional rate taxpayers after midnight 22 June;
– The lifting of the entrepreneurs’ relief limit to £5m for disposals from midnight 22 June;
– The maintenance of the CGT annual exemption at £10,100;
– The promise of consultation on the limitation of higher rate tax relief on pensions with the real possibility of a simplified solution founded on the reduction of the annual allowance to £30,000 – £45,000;
– The reduction of the main rate of corporation tax to 27% from 1 April 2011;
– The reduction of the small companies’ rate of corporation tax to 20% from 1 April 2011.
It is Technical connection’s view that these and other tax changes (already in place) give advisers a range of excellent opportunities to initiate tax-saving ‘proactivity campaigns’ aimed at helping to improve the financial wellbeing of their clients. For example, on issues such as CGT and the choice of tax wrapper , higher rate and additional rate taxpaying investors will need to be more careful over the selection of the type of investment wrapper that will give them the most tax efficient return on their investment. Prior to the announcement, it was generally thought that investment bonds were ‘tax preferable’ for income portfolios and collectives were ‘tax preferable’ for capital growth. While this remains broadly true, following the increase in the rate of CGT for higher and additional rate taxpayers, UK investment bonds may now look more tax attractive for a wider range of portfolios.”
Technical Connection also state that for those choosing a collective structure for whatever reason, then it would seem that (subject to appropriateness on non-tax grounds) multi-managers and funds of funds would offer an environment in which disposals could be made by the fund manager without the investor having to consider any potential CGT liability.
Wickenden adds: “There seems little doubt though that the CGT rate increase for those who are higher/additional rate taxpayers and who expect to make gains in excess of their annual CGT exemption only serves to make product wrapper choice, especially for the larger investment, continue to be something to be undertaken with the benefit of advice.
“For this reason and many others the financial planning tools and range of funds and bonds on platforms such as Cofunds remain important to financial planners.”
Cofunds Sales and Marketing Director, Alastair Conway, says: “As Technical Connection has highlighted, advisers should expect their platforms to provide a range of tools, videos and information on the post-recession financial environment to enable them to service their clients fully, especially in light of the emergency budget tax changes. There is a clear desire for help and assistance on this; the fact that we had over 400 advisers log in for our live webinar on the subject proves that point emphatically.”