Changes for pension schemes, divorce law and funding of social care were all included in the Queens Speech on 14 October. Now that a General Election has been called it is unlikely that these proposals will be enacted. However some measures may be revived in the new parliament. We will eagerly await the manifestos and will provide further updates on what parties are offering in so far as they affect our personal finances and business.
Key Highlights included:
Couples will need to agree the financial aspects of their separation earlier, to avoid the pitfalls of losing the financial protection and tax breaks of marriage on receiving the decree absolute, without alternative arrangements in place.
Our Financial Planning on Divorce team have developed cash flow planning tools to help couples and their lawyers plan for a realistic split of assets. This interactive tool considers various scenarios, taking account of the needs of each party, the impact of taxation and the cost of borrowing. Quicker Divorce Makes Planning A Priority
Probate Fee U Turn
Away from Parliament, the Government announced on 12 October that it’s dropping its controversial plans to increase probate fees. This U turn is welcomed by LEBC which joined others in campaigning against the probate tax.
High Income Child Benefit Charge
This tax charge has been criticised as over complex by the Office of Tax Simplification, (OTS) which recommends that the Department for Work and Pensions overhauls the process and paperwork to make it easier for new parents to understand what they can claim and when they may have to pay the tax charge.
One of the complications is that if the child benefit is waived, any non- working parent loses credits for the State pension while they are full time carers. The OTS says that expecting new parents to realise that there is a connection between child benefit and State pension entitlement is unrealistic and that many parents are unaware that they are losing up to £250 per year of retirement income each year. DWP only permits backdating of pension credits for 3 months. The OTS wants full backdating.
LEBC has helped many parents restore their right to child benefit on a tax -free basis by the high earner (income over £50,000) making pension contributions to reduce the income assessed for this. Parents Can Eliminate Child Benefit Tax
Pensions Savings Taxation
The OTS calls for the pensions savings tax relief regime to be simplified. It follows the plight of doctors turning down extra shifts, due to the perverse taxation of their pension savings, once their income exceeds £110,000. NHS staff are not alone in having to choose between earning more or reducing pension savings. The annual allowance taper can lead to large unexpected tax bills, even though the individual’s savings may be well below the Lifetime Allowance of £1,055,000.
LEBC agrees with the OTS that the current rules which restrict tax relief via both an annual allowance and a lifetime allowance are too complex, and reform is needed. Meanwhile we can guide those affected by these restrictions on how to manage their retirement saving and to maximise the tax relief available.
Director of Public Policy, LEBC
Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest. All information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation, are subject to change. Taxation advice is not regulated by the FCA.
 Association of British Insurers estimates 2018, https://www.abi.org.uk/news/news-articles/2018/10/the-uks-lost-pension-mountain-could-be-worth-20-billion/, accessed 18/10/19Back to News & Views
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