Further to today’s Budget, Top 100 law firm Cripps LLP, have shared their key takeaways regarding the impact of today’s Budget on private clients.
Kate Arnold, Head of Cripps’ Private Client Group, and Paul Fairbairn, Head of the Private Wealth Sector Team, said:
“As an adviser to wealthy individuals, families, landowners and non-doms, this Budget – one of the most anxiously anticipated by our clients in recent years – has contained less of concern than was expected. Overall, and pending a full review of the draft legislation, we see this Budget as necessitating a careful review of any historic planning – but on the whole, is not as punitive as feared.
“After all the leaks and comments from the government it is no surprise that CGT rates have gone up, but a pleasant surprise that they have only gone up to 24%. Those who thought the Chancellor would place the final nail in the coffin of Business Asset Disposal relief (formerly Entrepreneurs Relief) were wrong, but it will no longer be so generous – creeping up to 18% from 10% over the next two years – so those investors looking to exit will have a small incentive to do so soon rather than later.
“Inheritance tax has seen the widest range of speculated outcomes. Speculation was rife that Agricultural Relief and Business Relief would be scrapped, and although they will not be scrapped they will instead be limited so that the first £1 million is free of inheritance tax. Any value above £1 million will have an effective rate of 20%. Crucially however this will not come into effect until 2026, which may afford opportunities for planning between now and then (although there will be some anti forestalling measures). Whilst 2026 seems a long way off, careful consideration will be needed and affected families should seek advice sooner rather than later.
“We know Business Relief on AIM listed shares was in the Chancellor’s cross-hairs, which had already resulted in a contraction in the market. Her halfway house of announcing a 20% effective rate will probably now prevent a further slump, as those invested for the tax benefits will still prefer a 20% rate to a 40% rate.
“The biggest inheritance tax change is the abolition of tax relief on inherited pensions from April 2027. This is not a new idea and we have seen it before, so advisers will be dusting off historic advice to consider how best to minimise the impact of this change.
“A big surprise, which had not even been hinted at, was an increase to the already punitive SDLT surcharge for second homes from 3% to 5% from tomorrow. A nasty surprise for those about to buy unless they are able to complete today.
“After the last government tried to steal Labour’s clothes when it came to non-doms, we knew domicile would no longer be a determining factor in favourable tax treatment. In recent weeks the big question was whether the Chancellor would row back on the inheritance tax treatment of trusts set up by non-doms, but her speech was silent on this. So now us tax professionals who work with ‘non-doms’ (new name still to be determined) will be wading through the legislation to work out what this actually means for their clients.”
