M&G Feeder of Property Portfolio Fund

M&G Feeder of Property Portfolio Fund will lift its current suspension of trading from 12 noon Friday November 4th, 2016. Trades can be placed up to 24 hours before that, for a November 4th trade date.

The fund of course feeds M&G Property Portfolio.

It appears the main property fund which remains suspended at the current date is Aviva Property Trust (formerly Norwich Union Property Trust).

M&G-Feeder-of-property-portfolio-fund-reopening

M&G Feeder of Property Portfolio Fund is opening for business again!

 

Property Funds are Opening Up Again!

Property Funds – Suspensions as at 27/09/2016:

The following property funds will resume dealing for the valuation point on the dates stated below.

Threadneedle UK Property Authorised Trust (Feeder) – Monday 26 September 2016
Henderson UK Property PAIF Feeder – Friday 14 October 2016
Standard Life UK Real Estate Feeder – Monday 17 October 2016

The following UK property funds are still suspended:

Aviva Investors Property Trust
M&G Feeder of Property Portfolio

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Busting the 5 most common Pensions Lifetime Allowance (LTA) myths

LTA – Lifetime Allowance (Pensions). This is an excellent article published by Standard Life 5/7/2016. Because it is on their adviser site you cannot follow a link to it (requires login) but I have reproduced it here because it is so current on the topic of the Pensions Lifetime Allowance (LTA).

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Pensions may still be the best place for savings even though individuals have reached their lifetime allowance (LTA).

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LTA maxed out nearly? no problem. In contemplation of a happy retirement.

And yet this appears to be a watershed for many. Pension funding is possibly being switched off due to approaching or reaching the LTA without a thought. But such drastic steps should only be taken if there is a better financial alternative.

Of course, contributions made by those with enhanced or fixed protection would result in forfeiture, and so these clients would need more careful attention of the pros and cons before re-starting any funding.

But for everyone else rapidly approaching the £1 million – should they ‘limit’ themselves or make ‘allowance’ for more funding?

Let’s look at busting five common myths that may be contributing to the perception that continued funding above the LTA is always ‘bad’.

Myth # 1 – Contributions must stop when you reach the LTA.

The key word is ‘allowance’. It is not a ‘limit’ to funding as some seem to think.

There’s nothing to prevent individuals from continuing to pay in – they still have an annual allowance available (£40,000 if not reduced by the tapering for high earners), allowing them (or their employer) to make contributions and get tax relief at their highest marginal rates. The LTA is not a barrier to pension saving or the growth on the investment, it’s the point where you have to look at what the likely tax treatment of this additional fund will ultimately mean. In this way it is no different to any other allowance such as the personal income tax allowance, annual capital gains tax allowance or the new dividend allowance – once breached, tax will be applied.

Of equal importance for all employees, if funding is stopped, there may be no alternative form of remuneration on offer to replace the employer pension contribution. This can considerably strengthen the argument to carry on funding.

Remember where an employer does offer alternative remuneration this will be fully taxable and the amount available to invest will have suffered income tax and NI.

Myth # 2 – There is a tax charge to pay as soon as the LTA is reached.

When individuals hit the LTA with their fund… nothing happens. There’s no immediate penalty, the pensions police do not coming knocking at the door. Your client just has a fund greater than the amount the allowance protects. The tax charge is only incurred when benefits are crystallised, such as when the fund is designated for drawdown.

Myth # 3 – The LTA tax charge is applied when you start to take benefits.

The charge only starts to bite when there’s not enough LTA to cover the fund that is being crystallised. Benefits are tested when they vest, a process referred to as crystallisation. Each time the individual crystallises some of their pension a percentage of the LTA is used, but the charge itself only comes into play when there’s no longer have enough LTA available to cover the amount being crystallised.

So by phasing retirement, only crystallising enough funds as are needed each year, means that the timing of the LTA charge can be managed, at least up to the age of 75 (at which point uncrystallised funds will be tested along with any investment growth on crystallised funds). When are funds over the allowance are going to be accessed – will that be during their own lifetime or after their death? These considerations will help to predict the potential tax charge on excess funds.

Myth # 4 – The penalty for exceeding the LTA is 55%

The charge is often expressed as 55%, but that is only payable if the whole of the chargeable amount is taken as a lump sum. If the individual moves it to their drawdown pot only 25% will be deducted (remember there is no tax free cash element). This would be beneficial if the income tax then applied when withdrawing an income is less than 40%, which will be the case for many clients in retirement who are able to control the level of their taxable income from effective management of tax allowances.

Will it even be the client that’ll be drawing the money? Because…

Myth # 5 – On death, there will be another LTA test on funds in drawdown

There is no 2nd LTA test on death for crystallised funds. So if the client dies before age 75 their beneficiaries will be able to inherit the pot without any further lifetime allowance charges. And of course, income they take will be tax free – so the only charge incurred was the 25% LTA charge when it was originally put into drawdown.

If the client dies after age 75 then the beneficiaries would pay income tax at their own rates on amounts drawn. So depending on their other income, this could potentially be only subject to basic rate tax, or even covered by their own personal allowance.

Summary

Bearing in mind these points, when might it make sense for your clients to continue paying into their pensions above the LTA? One key factor will be whether your client is in a workplace pension and whether there is any alternative remuneration/reward being offered.

If a contribution is coming from the employer then the cost to the employee is nil. If the individual is paying the contributions themselves, then what is the cost to them? What level of tax relief does the contribution attract? And does paying a personal contribution gain a matching employer payment?

Getting an employer contribution would seem the most beneficial – no cost to the individual and a taxed benefit is better than no benefit at all (assuming the employer contribution can’t be converted into extra salary).

Another key factor will be whether your client can get higher tax relief on contributions paid in than will be deducted when benefits (retirement income/death benefits) are paid out. If the contribution all gets 40% relief going in, but coming out is subject to the 25% LTA charge and then basic rate tax only, then the return is the same as if it had gone into an ISA. And given that headline tax rates are only part of the story, with effective tax rates taking the overall percentage lower, the actual cost of withdrawing the money could be a lot lower.

A pension income for the member is only part of the story. Funds within a pension also benefit from the fact that:

  • Investments held within the fund do not suffer further tax on income or gains, and;
  • On death, they can be passed on free of IHT to provide lump sums or pension income for any named beneficiaries. It may be that an individual does not need to rely on their pension savings in retirement, and there would be no point in taking money out and potentially exposing it to IHT at 40% on top of the other tax charges already discussed. And if the individual dies before age 75, then after any LTA charge has been dealt with, the income or lump sum would be tax free for those beneficiaries – so potentially only a 25% charge.

Ultimately, having a fund approaching the lifetime allowance doesn’t mean that pension saving has to cease. A considered approach can show that there may still be reasons to continue funding depending on the client’s circumstances. And remember from April 2018 the LTA will become inflation linked so it won’t remain £1M forever.

 

(courtesy: Standard Life technical consulting –  July 2016)

Retirement Options – How about a sensible, non-sales based guide?

The Retirement Options bible is an important read for anyone planning for their retirement. It explains the different types of retirement options available in the UK.

Whenever we deal with a client concerning retirement planning, one of the first things we do is hand them a copy of our Retirement Options bible. This is a completely factual guide to the different types of retirement options available in the UK and how they work.

It’s not a sales aid – far from it! Written by compliance people, it might be considered a tad dull, but nevertheless it is a useful text for those who are beginning to think about retiring and how to utilise their pensions.

We’re happy to send interested parties a copy for free. Just call us on 0345 013 6525 or email enquiries@dfmadvice.co.uk  giving your name address and telephone number and we’ll email you a copy. All we ask in return is that you allow us a follow-up telephone call to chat about your plans and offer our services (and the first meeting is free and no-commitment required anyway).

The Retirement Options guide outlines the different options available to you from your pension funds when you retire. It also provides useful information about the state pension and the benefits available from workplace pensions your employer may have provided for you.

You may be aware that there have been a number of changes over the last year.  This will affect the way in which you will be able to take your pension benefits. Please read the guide carefully as you consider the options now available to you.

The options described generally apply to defined contribution (money purchase) pension pots such as personal pensions, group personal pensions, self-invested personal pensions (SIPPs), and stakeholder pensions. These options are not normally available to final salary pension schemes (unless transferred first to a defined contribution pension – which, for most people, is unlikely to be advantageous).

  • members of the public please, not industry people wanting to crib from it!

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Fund News: Standard Life UK Real Estate Feeder – Suspension

Standard Life has suspended the Standard Life UK Real Estate Feeder fund (all share classes) with effect from 12 noon on 4 July 2016.

Following the EU referendum result the fund has seen an increase in outflows. In order to protect the interests of all investors, Standard Life has decided to suspend the fund. The suspension will cease as soon as practicable. Standard Life will review the suspension at least every 28 days.

Policyholders will be notified and further updates will follow.

Fund News: Aviva Investors Property Trust – Suspension

Aviva Investors has suspended the Aviva Investors Property Trust fund (all share classes) with effect from 12 noon on Monday 4 July 2016.

Aviva has been experiencing higher than usual requests to sell units in the fund.  In order to protect the interests of all investors, Aviva has suspended the fund until further notice.

Policyholders will be notified and further updates will follow.

High Earners – Time is Running out to Maximise Pension Funding and Guarantee your Tax Relief.

It has already been announced that high earners will see their annual allowance for tax relieved pension contributions reduced from £40,000 to as low as £10,000, commencing next tax year 2016-17.

But the impending budget on March 16, 2016 may well contain an announcement concerning the outcome of the pension tax relief review which could limit the level of tax relief which is allowed. If it does, then higher rate and additional rate taxpayers are most likely to be affected.

Whilst it is possible that no material changes will occur, it is also possible that substantial changes to the pension tax relief system may be enacted with immediate effect on March 16th. For those in a position to do so therefore, it would be prudent for higher rate and additional rate taxpayers in particular to consider maximising pension contributions between now and March 16, to obtain tax relief at the taxpayers highest marginal rate whilst it is still available.

Take advantage of carry forward to utilise contribution allowance available from 2012-13.

One must use all of this year’s remaining annual allowance, then you can look back up to three years and use earlier unused allowance. The tax relief obtained is applied in the current tax year. The example below shows how this might stack up:

PIP start PIP end Annual Allowance actual Pension input Available Notes
10-07-15 05-04-16 nil £16,500.00 £23,500.00 Special rules. Balance of 2015-16 capped at £40k. This will be available for c/fwd.
01-04-15 09-07-15 £80,000 £5,500.00 nil Up to £40k additional was available from 1-4-2015 to 9-7-2015 (only) (no c/fwd applies)
01-04-14 31-03-15 £40,000 £22,000.00 £18,000.00
01-04-13 31-03-14 £50,000 £20,000.00 £30,000.00
01-04-12 31-03-13 £50,000 £12,500.00 £37,500.00
£109,000.00 Total Allowance remaining in 2015-16
£61,000.00 Gross payment required to use all of 2012-13 allowance

In the example above, The maximum contribution which would still attract tax relief is £109,000. The lesser payment of £61,000, which comprises the remainder of the current tax year plus all of the remainder of 2012 – 13, may be attractive as it utilises that tax year’s remaining allowance before it disappears.

If you have sufficient earnings to obtain 40% or 45% tax relief on a large lump sum payment now, and have the means to do it, then you should consider this very closely.

It can even be sensible for certain individuals to pay more than they can comfortably afford at the moment, in effect paying next year’s contributions now in order to obtain the certainty of tax relief, particularly in view of the “squeezed” annual contributions allowance which applies next tax year for higher earners.

What is the new reduced annual allowance and who is affected?

I covered this in an earlier blog – see https://www.dfmadvice.co.uk/november-2015-autumn-budget-statement/ , but to summarise:

Test one: If your “adjusted income” exceeds £150,000 in a tax year, then your annual pensions contribution allowance will be reduced by £1 for every £2 of excess ” income”, until your allowance reaches £10,000. “Adjusted income” is essentially your income from all sources plus employer pension contributions.

Test two: If your “threshold income” (your income from all sources but excluding employer pension contributions) does not exceed £110,000 for the tax year then test one does not apply to you and there should be no reduction of annual pensions contribution allowance.

Therefore the ability for higher earners to make large pension contributions and obtain tax relief at their highest marginal rate is going to be severely reduced starting next tax year.

So what happens when pension contributions in excess of the annual allowance are made? The contributions can still go into your pension plan, but employee contributions will not receive tax relief on the excess, and employer contributions will be taxed on the excess.

Conclusion

Whilst the above is admittedly quite tricky to follow, what it adds up to is that higher earners should be considering making extra pension contributions between now and March 16th, to make sure of obtaining tax relief at their highest marginal rate, 45% or 40%.

 

Disclaimer: the foregoing does not constitute financial advice . We do not hold a crystal ball and do not know what the outcome of the budget review will be. And as ever we cannot state whether any particular course of action is best for one individual over another. The information offered in this blog is intended purely to inform and where necessary act as a call to action, namely to review your situation and consider whether the taking of certain steps is to your advantage. It is essential therefore that if you intend making any major pension contributions in the coming days and weeks that you seek independent financial advice.

Scottish Provident and Bright Grey are changing branding to Royal London

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Bright Grey has been a sub-brand of Royal London for some time, and is now being fully rebranded under the parent brand.

Opinion: Bright Grey has been a pretty good protection provider, historically with competitive rates for life insurance, Critical illness cover, and income protection. Also was an early provider of “relevant life”  life cover for small businesses and sole traders, as well as  mainstreambusiness protection.

 

 

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Likewise, Scottish Provident has been part of the Royal London group for some years now, and that brand is also going with effect from today, December 1st 2015, and replaced by Royal London’s.

Opinion: Scot Prov was a popular provider of protection, and years ago even provided some personal pension contracts. It’s most famous product was probably its “Pegasus” Whole of Life cover, which sold well as its early premiums (always reviewable) were low. However, as many are now finding, the trouble with reviewable premium WOL policies is they start to go up at an alarming rate as you get older. I have seen many forced to ditch the policies in later life as the premiums become unaffordable. It pays to look at guaranteed rate WOL policies, if indeed WOL is what you really want (in my opinion its main use is within IHT and estate planning). A good talk with a good adviser often sorts out the best way to go when face with this situation.

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NOVEMBER 2015 AUTUMN BUDGET STATEMENT

George Osborne’s Autumn Budget Statement did not contain any major shocks this time around ( a relief for us advisers for a change), but there is still plenty to take on board. The following summary is reproduced with kind permission of Scottish Widows:

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SUMMARY IMPACT

Whilst only minor changes affecting the financial services industry were announced in the Autumn Statement the key changes for 2016/2017 set out by The Chancellor previously will still apply. The details and opportunities for financial planning advice are outlined below.

 

PENSIONS

Automatic enrolment

There will be a six month delay in the scheduled increases in the minimum contributions rates for automatic enrolment. This will bring the increases in line with the tax year. The first increase will apply from 6 April 2018. The second increase will apply from 6 April 2019.

Annual allowance

  • The standard annual allowance in 2016/2017 will be £40,000.
  • The money purchase annual allowance in 2016/2017 will be £10,000.
  • The annual allowance for high earners will be reduced to between £10,000 and £40,000 (see below)

Higher earners tapered annual allowance

  • The reduced annual allowance will affect those with both ‘adjusted income’ of more than £150,000 and ‘net income’ of more than £110,000.
  • ‘Adjusted income’ includes employer and employee pension contributions (except those made under the ‘relief at source’ basis). ‘Net income’ excludes pension contributions, unless paid under a salary sacrifice agreement, set up on or after 9 July 2015. This is to prevent tax avoidance. Where adjusted income and net income exceed the respective thresholds, the taxpayer’s annual allowance will be reduced by £1 for every £2 of adjusted income in excess of £150,000. The maximum reduction is £30,000, which would result in an annual allowance of £10,000. The level of adjusted income at which the maximum reduction in the annual allowance is reached, is £210,000.

Pension input periods

  • All pension input periods will be aligned with the tax year from 2016/2017, with no option to vary the period. All pension input periods closed on 8 July 2015 (the pre-alignment period). A further pension input period runs from 9 July 2015 to 5 April 2016 (the post alignment period). This change was to ensure no tax charges arise against those who had fully funded their pensions in advance of the change. The total annual allowance for the pre-alignment period is £80,000, up to £40,000 of which is available to carry forward into the post alignment period.
  • Carry forward from the 3 previous tax years will be available as normal. However when using carry forward from 2016/2017 onward it will be based on the tapered annual allowance rather than the standard annual allowance.
  • The money purchase annual allowance of £10,000 will still be available, however, taxpayers who are affected by both the money purchase annual allowance and the tapered annual allowance will retain the £10,000 money purchase annual allowance but will suffer a reduced annual allowance for funding non-money purchase schemes.

Lifetime allowance (LTA)

    • The LTA will reduce to £1 million for 2016/2017 and 2017/2018. There will be a new round of transitional protection; Fixed Protection 2016 and Individual Protection 2016. These will work in the same way as Fixed Protection 2014 and Individual Protection 2014. Those applying for Fixed Protection need to cease contributions/benefit accrual by 5 April 2016. The application process isn’t expected to be available until July 2016.
    • The LTA will then be index-linked in line with the consumer prices index (CPI) from 2018/2019.
    • As a reminder, those who want to apply for Individual Protection 2014 must do so online by 5 April 2017.

Tax relief

    • Other than for higher earners as noted above, there’s no change to the rate of tax relief for member contributions, which will continue to be based on the individual’s highest marginal rate.

Pension tax relief reform

    • The Government is considering the responses to the consultation of the reform of pensions tax relief. It will publish its response in the 2016 Budget.

Extension of Freedom and Choice agenda to existing annuitants

    • The ability to sell annuities in payment is being deferred for a year, from April 2016 to 2017. The Government will set out its plans for the secondary annuities market in December 2015.

Lump sum death benefits

    • Lump sum death benefits paid following the death of a member aged 75 or over will change from being taxed at the flat rate of 45% to the beneficiary’s marginal rate of income tax from 6 April 2016.

Salary exchange

    • Whilst there were no changes to salary exchange the Government remains concerned about the growth of these arrangements and so the cost to the taxpayer. The Government restated that it will actively monitor the growth of schemes and the impact on tax receipts.

IMPACT:

      • Those who had paid less than £80,000 in their pension input period ending on 8 July 2015 can make further contributions without exceeding the annual allowance. The maximum contribution that can be made without an annual allowance tax charge arising, is the amount of the unused £80,000 annual allowance for the pre-alignment period, up to a maximum of £40,000 plus carry forward from 2012/2013, 2013/2014 and 2014/2015.
      • Higher rate taxpayers still benefit from higher rate relief on contributions of at least £40,000 in 2015/2016. With further potential restrictions to tax relief being considered, those with sufficient funds could consider funding sooner rather than later while full tax relief is still available.
      • The reduction in the Lifetime Allowance to £1 million from 6 April 2016 will greatly widen the scope of those within the restrictions. While the introduction of index-linking from April 2018 is welcome, it’s far short of a return to the £1.8 million LTA in place in 2011/2012 which itself was originally intended to rise in line with inflation. The next round of pension protection will help mitigate the impact for some clients. Those clients with significant funds and no previous protection should consider applying for Fixed Protection 2016 and/or Individual Protection 2016 or Individual Protection 2014.
      • The delay in the implementation of the secondary annuity market to 2017 is welcome as it gives more time for providers and advisers to ensure they are fully prepared for any changes.

 

DIVIDENDS

    • From April 2016, the current 10% dividend tax credit will be abolished. It will be replaced with a new £5,000 a year dividend tax allowance.
    • The new rates of tax on dividend income above the allowance will be:
      • 7.5% for basic rate taxpayers
      • 32.5% for higher rate taxpayers
      • 38.1% for additional rate taxpayers.

IMPACT:

        • The Government’s stated intention is for these reforms to reduce the incentive to incorporate and remunerate through dividends. The tapered annual allowance for those with incomes including pension contributions of over £150,000 will also apply from April 2016. There will be considerably less scope to use dividends and employer pension contributions to maximise tax efficient director’s remuneration in future. Companies with undistributed profits should consider taking advantage of the last chance to make the most of these strategies before the end of the current tax year.
        • Higher rate and additional rate taxpayers with modest dividend income from share/OEIC portfolios will welcome the change, with a potential saving of up to £1,250 a year from 2016/2017 for a higher rate tax payer, compared to now.

 

INCOME TAX

Personal allowance and higher rate threshold

    • In 2016/2017 the income tax personal allowance will see another substantial increase of £400 to £11,000. A further increase to £11,200 was announced for 2017/2018.
    • The basic rate band increases to £32,000 for 2016/2017. Those entitled to the full standard personal allowance will pay 40% tax on income above £43,000. The threshold for higher rate income tax increases by £615 for 2016/2017.
    • The basic rate limit will increase to £32,400 for 2017/2018. Together with the planned increases in the personal allowance, this means the higher rate threshold will be £43,600 for 2017/2018. These are the next steps in the Chancellor’s stated aim of increasing the higher rate threshold to £50,000.

Property letting

    • From 1 April 2016 higher rates of stamp duty will be charged on further purchases of residential property i.e. second homes or buy to let properties. The additional rate will be 3% above the standard rate and will apply to properties worth more than £40,000. It is not expected to apply to corporates or funds making significant investments in residential property. The Government will consult on the policy detail,
    • The tax relief on mortgage interest will be restricted to basic rate for mortgages on ‘buy to let’ residential properties. The restriction will be phased in over 4 years from April 2017.
    • ‘Rent a room’ relief will be increased from £4,250 to £7,500 from April 2016. The relief had been frozen since 1997.
    • From April 2019, if capital gains tax (CGT) arises from a disposal of residential property the taxpayer must pay it within 30 days of completion. Under the current system tax is due between 10 and 22 months after disposal.

IMPACT:

      • Higher rate taxpayers will welcome the further increases in the higher rate threshold, however, the rates from 2016/2017 and 2017/2018 are still a long way off the Chancellor’s stated aim of a £50,000 higher rate threshold. In the meantime pension contributions benefiting from higher rate relief remain an attractive savings option.
      • A further substantial increase in the personal allowance means that higher earners can achieve even greater benefit by using pension contributions to reduce adjusted net income above £100,000. For someone with gross income of £122,000 a pension contribution of £22,000 will cost just £8,800 in 2016/2017, attracting tax relief of 60%.
      • A further blow to the buy to let market. The 3% increase in stamp duty coupled with the reduction in the tax relief on mortgage interest will significantly increase the costs, along with bringing forward the CGT payment date by up to 21 months. It may also prove difficult to work out the correct taxable gain and the amount payable within 30 days of completion, particularly where valuations and complex calculations are required.

 

TAX EFFICIENT INVESTMENTS

ISAs

    • The ISA limits will remain unchanged for 2016/2017. The main ISA limit will remain at £15,240 and the limit for Junior ISAs and Child Trust Funds will be £4,080.
    • The ‘Help to Buy’ ISA will be available from 1 December 2015. This new product will enable first time buyers to save up to £200 per month towards a first home, with an initial one-off deposit of £1,000. The Government will boost savings by 25% up to a maximum of £3,000, which will be paid when a property is purchased.
    • New flexible ISA rules will be introduced from 6 April 2016. The rules will allow investors to pay withdrawals from a cash ISA back in to the account before the end of the tax year, without reducing their subscription limit further. The change will also cover cash held in stocks and shares ISAs.

Personal savings allowance

    • From 6 April 2016, a tax-free savings allowance of £1,000 will be available to those with taxable income of less than£43,000 i.e. basic-rate payers and below. Higher rate taxpayers benefit from a £500 tax-free allowance. Those earning over £150,000 are not entitled to an allowance.

IMPACT:

      • Some savers and investors will be disappointed in the freezing of the ISA allowance, however they have received substantial increases in recent years
      • The personal savings allowance provides more incentive for savers with even higher rate taxpayers benefiting from an allowance. However, it’s most generous for low earners who will potentially pay no tax on their savings where total taxable income is less than £17,000 in 2016/2017, after taking into account the £5,000 savings band.
      • New flexible ISA rules allowing cash withdrawals to be returned to an ISA by the end of the tax year will help to maximise the benefits by removing an effective penalty on those who are forced to access their savings temporarily.

 

INHERITANCE TAX (IHT) AND TRUSTS

    • The Government aims to reduce the number of estates paying IHT by introducing an additional nil-rate band from April 2017. This will apply where the main residence passes on death to direct descendants such as children and grandchildren. This will be worth up to £100,000 in 2017/2018, £125,000 in 2018/2019, £150,000 in 2019/2020 and £175,000 in 2020/2021 with CPI indexation applying thereafter. As with the existing nil-rate band, any unused nil-rate band will be able to be claimed on the death of their surviving spouse or civil partner. Those with net estates worth more than £2 million will see the additional nil-rate band scaled back by £1 for every £2 over this threshold. Further guidance on the downsizing provisions was published in October 2015 with legislation on this aspect in Finance Bill 2016.
    • The IHT nil-rate band is currently frozen at £325,000 until 5 April 2018 and this will continue to apply until April 2021.
    • Following the review of deeds of variation no changes will be made. The Government will continue to monitor their use.

Drawdown funds and IHT

    • The Government will introduce legislation to clarify that no IHT applies on unused drawdown funds remaining on death. The legislation will be backdated to April 2011.

IMPACT:

      • The changes to IHT remove the family home from the IHT net for all but the wealthiest homeowners although the maximum benefit of £1m won’t be available until tax year 2020/2021 due to phasing of the allowance.
      • Those with larger estates will still need advice on steps they can take to mitigate IHT.

 

NON-DOMICILES

    • From April 2017 foreign domiciles who have been long term resident in the UK – more than 15 of the past 20 tax years will be deemed to be UK domiciled for taxation purposes. This will mean they will no longer be able to utilise the remittance basis of taxation and will be subject to tax on a worldwide basis on their income and gains. They will also be deemed domicile for IHT purposes – bringing forward the point at which IHT applies to their worldwide assets from the current period of 17 out of the past 20 years ending in the year of transfer.
    • It will no longer be possible for individuals born in the UK to UK domiciled parents to leave the UK, claim non-domicile status then return to the UK and continue to claim non-domicile status for tax purposes.
    • The Government also intends to introduce new rules from April 2017 to ensure IHT is payable on all UK residential property owned by non-domiciles regardless of their residence status.

 

CORPORATION TAX

    • The corporation tax rate will be cut from 20% to 19% in 2017 and then to 18% in 2020.
    • For accounting periods starting on or after 1 April 2017, corporation tax payment dates will be brought forward for companies with annual taxable profits of £20 million or more. This threshold will be divided by the number of companies in a group. These companies will pay corporation tax in quarterly instalments in the third, sixth, ninth and twelfth months of their accounting period.
    • The permanent level of the Annual Investment Allowance (AIA) will increase from £25,000 to £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.

IMPACT:

      • Companies may consider making employer pension contributions before the lower rates of corporation tax reduce the effective rate of tax relief available.

 

NATIONAL INSURANCE

    • The £2,000 National Insurance employment allowance, which reduces the overall cost of employer National Insurance Contributions (NICs) for employers will increase from £2,000 to £3,000 from April 2016. From the same date, companies where the sole employee is the director will no longer be able to claim this allowance.
    • The Government will actively monitor the growth in salary exchange (also known as salary sacrifice) schemes used to reduce the amount of employee and employer NICs.

IMPACT:

      • As automatic enrolment continues to roll out, employers and employees are looking for ways to reduce the net cost of pension contributions. Salary exchange arrangements, where an employee opts to give up salary in exchange for a higher employer pension contribution, still offer NICs savings for both employees and employers.

 

STATE BENEFITS, TAX CREDITS AND THE MINIMUM WAGE

State pension

    • The basic State Pension increases in line with the triple lock by £3.35 to £119.30 a week for 2016/2017.
    • The Pension Credit Standard Minimum Guarantee increases by £4.40 to £155.60 a week for a single person and by £6.70 to £237.55 a week for couples for 2016/2017. The Savings Credit threshold will increase to £133.82 for a single pensioner, reducing the single rate of the Savings Credit maximum to £13.07. It will increase to £212.97 for couples, reducing the couple rate of the Savings Credit maximum to £14.75.
    • The new single tier State Pension for people who reach state pension age from April 2016 will start at £155.65 a week for those entitled to the full rate.

Welfare reforms

    • The proposed cuts to tax credits have been withdrawn and the current system remains in place, although these ‘in work’ benefits will be gradually replaced as Universal Credit rolls out. The Universal Credit rollout schedule currently starts in 2016 with completion due by 2021.
    • From April 2016, payment of Housing Benefit and Pension Credit will stop for claimants who travel outside the UK for longer than 4 consecutive weeks.

Social care reforms

    • As previously announced, the ‘Dilnot’ reforms to social care funding in England are on hold until 2020. (Scotland, Wales and Northern Ireland all have their own social care funding arrangements.)

National minimum wage

    • The current rates shown below apply since 1 October 2015, with the previous rates shown in brackets:
    • £6.70 (£6.50) per hour – main rate for workers aged 21 and over.
    • £5.30 (£5.13) per hour – workers aged 18 to 20.
    • £3.87 (£3.79) per hour – workers aged under 18 and above school leaving age.
    • £3.30 (£2.73) per hour – apprentice rate for apprentices under 19 or 19+ and in their first year.
    • From April 2016, those aged 25 and over will benefit from an increased rate of £7.20 an hour, branded as the National Living Wage.

 

IMPACT:

  • Remember the minimum wage when planning with salary / dividend / pension profit extraction and salary exchange / sacrifice.

 

** Every care has been taken to ensure that this information is correct and in accordance with our understanding of the law and HM Revenue & Customs practice, which may change. However, independent confirmation should be obtained before acting or refraining from acting in reliance upon the information given. This information is based on announcements made in the July 2015 Budget and November 2015 Autumn Statement which may change before becoming law.

– Scottish Widows

First State to Stewart Investors – Funds – Change of Name

The First State funds listed below have changed their name by dropping the words “First State” and inserting “Stewart Investors”, (i.e. First State Asia Pacific Leaders becomes Stewart investors Asia Pacific Leaders, etc.):

  • First State Asia Pacific
  • First State Asia Pacific Leaders
  • First State Global Emerging Markets
  • First State Global Emerging Markets Leaders
  • First State Indian Subcontinent
  • First State Latin America
  • First State Worldwide Equity
  • First State Worldwide Leaders
  • First State Worldwide Sustainability

Earlier this year First State announced some changes to the structure of the First State Stewart (FSS) team which manages a number of their equity funds. These changes have seen the FSS team split to form two new teams; one primarily based in Hong Kong and the other primarily in Edinburgh. The Edinburgh team has become an investment division in its own right and rebranded Stewart Investors. Stewart Investors is a trading name of First State Investments (UK) Limited, which remains responsible for the funds

The changes apply across all investment platforms and personal pension contracts. The new fund names will appear on your valuations, statements and any other correspondence you receive. The fund objectives, risk profiles and Annual Management Charges have not changed.

The listed funds are very popular and are to be found on nearly all investment and SIPP platforms, and there are also insured pension fund versions.

Please call us for further information: 0345 013 6525.