Autumn Statement: Planners react

Keith Churchouse, founder and Chartered Financial Planner at Chapters Financial, welcomed the announcements from Chancellor Jeremy Hunt and said the review of dividend allowances could lead Financial Planners to review their approach to General Investment Accounts.

He added: “The reductions to CGT limits and dividend allowances are likely to see a review of taxable General Investment Accounts and their overall tax efficiency.

“I am not surprised that this has been looked at as an opportunity to raise more tax and is an opportunity for Planners to look again at what can be achieved. Perhaps the Investment Bond structure will become a more popular wrapper within which to invest.

“It was a skillful budget, although, as they say, the proof of the pudding will be in the eating.”

Charles Incledon, client director at Financial Planner and wealth manager Bowmore Asset Management, said the cut to dividend allowance and the Capital Gains tax threshold was a “double whammy” for investors.

He said: “While high net worth individuals are unlikely to feel much pain from this, for many small investors that increase in tax on dividends and capital gains is going to be significant.”

“Cuts to this income could cause a real squeeze on the finances of many small investors, especially those who are retired and depend on dividend income from their shares. Bad news considering that we have a cost of living crisis at the moment.”

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Claire Trott, divisional director for retirement holistic planning at St James’s Place, said Financial Planners should encourage their clients to take action this year before any taxation changes come into effect.

She said: “This was a far-reaching Autumn Statement with a lot to take account of and factor into short- and long-term Financial Planning. None of these changes come in with immediate effect so tax year end planning will be crucial. 

“The reduction in the dividend tax allowance next tax year means that those in receipt of dividends, that are not in a wrapper such as a pension or ISA, will see increased taxation over the next two years. It is therefore a good time to ensure that the investments are appropriately wrapped if possible.

“With the capital gains tax allowance reducing it is worth considering realising gains this tax year. Care needs to be taken when doing this which is where taking good financial advice can really add value.

“Even the changes to income taxation will mean that for those that have control over their income it may be wise to choose to access funds in a different way. If possible, accessing funds this year rather than next may help mitigate the increased income and dividend taxation. As with all these things the different levers work differently for each individual and business, which is why it is so hard to just take the generic headlines and apply them to your circumstances without expert help.”

Stephen Hughes, Financial Planner at Charles Stanley, was relieved that pension reliefs were left untouched.

He said: “Ahead of the Autumn Statement, many investors were concerned there were going to be changes in tax relief on pension contributions or the availability of 25% tax-free cash at withdrawal. Looks like pension legislation is being left untouched. With the real terms reduction in income allowance and reduction in Dividend and CGT allowances, maximising pension contributions, where appropriate, looks more attractive than ever.

“Many with smaller investments will be pulled into a requirement to fill in self-assessments due to the Consumer Gains Tax and dividend allowance reductions. Potentially, a lot of admin for a small amount of tax for HMRC.”

Wealth management trade body PIMFA called on the Chancellor to keep tax reforms under review following the statement.

Liz Field, chief executive of PIMFA, said: “While we support the Government’s long-term aim to stabilise the country’s finances and balance the books, regular changes to tax policy can be unhelpful and create confusion for those trying to save for their financial future or leave a legacy to their loved ones. Clarity in terms of tax policy allows people to save and invest for the future, safe in the knowledge that there will be few sudden changes that require them to adjust their own plans.

“The measures outlined in the Chancellor’s statement today will clearly impact on the ability of UK savers to put money aside as well as incentivising them to do so. We would urge the Chancellor to keep these under review to ensure that millions of people are incentivised to save and invest in future.”

Les Cameron, head of technical at M&G Wealth, said the statement could boost the demand for Financial Planning.

He said: “The Chancellor has extended the chill by increasing the period where all key rates and allowances will be frozen. As a result more people will be paying more tax with those in the £100,000 – £150,000 range having the most to consider. Where income comes mainly from employment then pension contributions may be a route to lessen tax bills for the average taxpayer.

“For those with investment income and gains speaking to a Financial Planner should allow them to make arrangements to lessen the impact on their finances. However, for many, tackling the effects of inflation and the ongoing cost of living crisis will no doubt be at the forefront of their minds.”

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