One myth from childhood has now been firmly busted – we no longer have the ability to use a spoonful of sugar to make the medicine more acceptable. The chancellor has reiterated that we are facing challenges to balance the books by the end of the parliament, due to the weak global economy. We need to face up to this and accept some short term pain for long term gain. To hit the message home, a new sugar levy is being introduced to discourage those in the soft drinks industry from making us all fat, by charging more tax on sugary drinks. The aim is to put the next generation first by using the £520m projected income from this levy to pay for sport in primary schools and to fund an extra hour of teaching or sport in secondary schools.
The main theme of the Budget was the creation of a ‘Britain for the future’, with the strategy of introducing lower taxes to encourage entrepreneurship, social mobility and economic stability.
For private clients, there was a fear that the simple solution would be a further raid on pensions. However, with the strength of the backlash played out in the press in the weeks leading up to the Budget announcement, Middle England voiced its concerns loud and clear, and the draconian proposals have been dropped, for now. The new lifetime ISA does not quite make up for the restrictions in pension contributions to be introduced, but it is a step in the right direction.
A strategy of raising more taxes through countering tax avoidance is not sufficient justification for continually moving the goalposts and re-defining what is acceptable tax planning. HMRC has been set a compliance yield of £27bn for 2016/17 by the government, and will continue to target the hidden economy and those that are enabling avoidance and offshore tax evasion. No one has any objections to measures that ensure that tax collection is fair and on a transparent basis. The fear is that HMRC sees its role as prioritising revenue generation over the provision of advice and collection of the correct amount of tax from taxpayers.
A more creative way of generating additional tax revenue is to reduce the rates of tax charged, which the chancellor embraced in relation to capital gains tax. The changes will not be applicable for carried interest and gains on residential property, but will apply to other assets. There are also some changes to entrepreneurs’ relief in line with the chancellor’s desire to make the UK an attractive place in which to set up businesses. In addition, increasing the personal allowance and increasing the higher rate threshold for income tax to reduce the number of people paying 40% tax were welcome measures.
The continued attack on the use of personal service companies has been very well trailed in the press. For most people in the UK who earn salaries through PAYE, this is simply putting all taxpayers on a more equal footing with those who have no choice in how they earn their living and get paid for providing services. The reality is that in some industries, it is difficult to obtain contracts unless you operate through a limited company, but the negative publicity surrounding those contracting with public bodies through personal services companies has ensured that any tax advantages will have to be squashed. This will inevitably result in more red tape for public sector organisations to deal with, as they will have to take on full responsibility for checking the tax status of any contractors to avoid being penalised by HMRC for accepting what is presented to them.
HMRC is not ignoring employees, either. Salary sacrifice schemes and redundancy payments are all subject to scrutiny, with taxation and national insurance contributions levied at the earliest opportunity.
Increasing the rate of IPT is another way of taxing transactions without the more obvious and feared route of increasing the headline rate of VAT. The insurance industry is wholly against this revenue raising strategy, but as it applies to private clients, the 0.5% hike is not as high as it was feared it could be, and will not be introduced until later this year.
Mention was made of micro-entrepreneurs and those who embrace digital technology. This is clearly aimed at those who trade on eBay and other platforms, and those who rent out driveways and storage facilities, most of whom probably are not declaring any income from these sources. This is drawing a line in the sand and essentially declaring HMRC’s interest in such sources of income.
For most private clients, the Budget proposals are not as draconian as many had feared. The reality is that the dramatic changes impacting on non-doms and those with buy to let properties are not yet in place, and so perhaps the March 2016 Budget is the sweetener we have been waiting for before the real pain kicks in.
Home >Articles > Budget 2016: The private client perspective
Budget 2016: The private client perspective
One myth from childhood has now been firmly busted – we no longer have the ability to use a spoonful of sugar to make the medicine more acceptable. The chancellor has reiterated that we are facing challenges to balance the books by the end of the parliament, due to the weak global economy. We need to face up to this and accept some short term pain for long term gain. To hit the message home, a new sugar levy is being introduced to discourage those in the soft drinks industry from making us all fat, by charging more tax on sugary drinks. The aim is to put the next generation first by using the £520m projected income from this levy to pay for sport in primary schools and to fund an extra hour of teaching or sport in secondary schools.
The main theme of the Budget was the creation of a ‘Britain for the future’, with the strategy of introducing lower taxes to encourage entrepreneurship, social mobility and economic stability.
For private clients, there was a fear that the simple solution would be a further raid on pensions. However, with the strength of the backlash played out in the press in the weeks leading up to the Budget announcement, Middle England voiced its concerns loud and clear, and the draconian proposals have been dropped, for now. The new lifetime ISA does not quite make up for the restrictions in pension contributions to be introduced, but it is a step in the right direction.
A strategy of raising more taxes through countering tax avoidance is not sufficient justification for continually moving the goalposts and re-defining what is acceptable tax planning. HMRC has been set a compliance yield of £27bn for 2016/17 by the government, and will continue to target the hidden economy and those that are enabling avoidance and offshore tax evasion. No one has any objections to measures that ensure that tax collection is fair and on a transparent basis. The fear is that HMRC sees its role as prioritising revenue generation over the provision of advice and collection of the correct amount of tax from taxpayers.
A more creative way of generating additional tax revenue is to reduce the rates of tax charged, which the chancellor embraced in relation to capital gains tax. The changes will not be applicable for carried interest and gains on residential property, but will apply to other assets. There are also some changes to entrepreneurs’ relief in line with the chancellor’s desire to make the UK an attractive place in which to set up businesses. In addition, increasing the personal allowance and increasing the higher rate threshold for income tax to reduce the number of people paying 40% tax were welcome measures.
The continued attack on the use of personal service companies has been very well trailed in the press. For most people in the UK who earn salaries through PAYE, this is simply putting all taxpayers on a more equal footing with those who have no choice in how they earn their living and get paid for providing services. The reality is that in some industries, it is difficult to obtain contracts unless you operate through a limited company, but the negative publicity surrounding those contracting with public bodies through personal services companies has ensured that any tax advantages will have to be squashed. This will inevitably result in more red tape for public sector organisations to deal with, as they will have to take on full responsibility for checking the tax status of any contractors to avoid being penalised by HMRC for accepting what is presented to them.
HMRC is not ignoring employees, either. Salary sacrifice schemes and redundancy payments are all subject to scrutiny, with taxation and national insurance contributions levied at the earliest opportunity.
Increasing the rate of IPT is another way of taxing transactions without the more obvious and feared route of increasing the headline rate of VAT. The insurance industry is wholly against this revenue raising strategy, but as it applies to private clients, the 0.5% hike is not as high as it was feared it could be, and will not be introduced until later this year.
Mention was made of micro-entrepreneurs and those who embrace digital technology. This is clearly aimed at those who trade on eBay and other platforms, and those who rent out driveways and storage facilities, most of whom probably are not declaring any income from these sources. This is drawing a line in the sand and essentially declaring HMRC’s interest in such sources of income.
For most private clients, the Budget proposals are not as draconian as many had feared. The reality is that the dramatic changes impacting on non-doms and those with buy to let properties are not yet in place, and so perhaps the March 2016 Budget is the sweetener we have been waiting for before the real pain kicks in.
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