Spring Budget Summary
No Change to Business Relief
The important headline for our investors is that the Government continues to support Business Relief and ways to mitigate inheritance tax using statutory exemptions.
Therefore, in a post-Brexit Britain the Government encourages trading activities and is committed to helping businesses pass on assets to their children free from inheritance tax.
No Change to Inheritance Tax
Some had hoped the Government would raise the £3,000 gift allowance to allow for inflation, this hasn’t changed since Sir Geoffrey Howe increased it by 50% in 1981. However, there has been no change to this allowance.
Figures released with the Budget show that HM Treasury expect inheritance tax receipts to continue to rise over the next five years up to £6.2bn in 2021/22.
In 2016/17 the Government collected £4.7bn and this is expected to increase by £1.5bn to £6.2bn in five years time.
Inheritance tax receipts have increased year-on-year, doubling between 2009/10 – 2015/16 and expected to almost treble by 2021/22. However, IHT remains a tax that, with planning, can be mitigated in full.
Reduction in the Dividend Allowance
Philip Hammond announced a significant cut to the recently introduced dividend tax free allowance, from £5,000 down to £2,000.
The new limit will take effect from April 2018 and it is expected that any investors with investment portfolios over £50,000 will be affected.
The move will likely push more people into tax-efficient wrappers such as ISAs.
Increase in Annual ISA Allowance
As previously announced in the Autumn Budget, the annual ISA allowance will increase by £4,760 in April 2017 up to £20,000.
This means that a married couple or civil partnership can contribute £40,000 per year to their ISA.
This makes ISAs an attractive investment choice for your clients because they can benefit from uncapped growth from income tax and capital gains tax.
In addition, ISAs invested in qualifying AiM listed companies can benefit from full inheritance tax relief after two years, find out more here.
HM Revenue & Customs, ‘Inheritance tax statistics: analysis of receipts’ 30 July 2015
HM Treasury, ‘Spring Budget 2017’ 8 March 2017