The changes in the Budget announcement were perhaps more muted than some were expecting.
They pose considerations for our ultra and high-net-worth clients.
Crucially, clients must consider tax in context. We remain proactive in our discussion with our clients about how they should be continually considering and assessing how best to plan for their goals, families and dependents.
Pensions now being included within inheritance tax may act as a prompt for clients to revisit their wills, both from a personal circumstance perspective and in relation to the changes announced.
While there were no immediate changes made to taxing pensions on the way in, IHT may apply to inherited pensions. This may drive individuals to choose to spend and drawdown from pension pots during the course of their lifetime.
In particular, there is scope to consider withdrawals from pensions earlier and ahead of death in order to act as a source of income, rather than using an IHT vehicle. Any changes must be balanced within the broader consideration of personal goals and holistic assets.
The capital gains tax increase was at the lower end of expectations. The decision to implement an increase on October 30 is important, providing no opportunities for clients to sell before the end of the tax year and lock in previous CGT rates.
In the short-term, we are therefore not expecting client behaviour to change or to see a race for withdrawals from investments.
Clients also need to consider what impact the proposed changes to business asset disposal relief over the next couple of years may have on their portfolio, with 4 per cent increases in each of the next two tax years.
Life insurance could be seen as a useful tool for those looking for additional sources of cash flow and liquidity for their executors on death.
This may also be a route to consider for family business owners looking to pass on their business to their children, given the announcement regarding the 50 per cent reduction in business property relief.
We are now counselling clients to take a step back and take the time to consider their specific needs; no one size fits all, and each individual or family office will need a bespoke plan in response to the changes announced.
Notably, this Budget may serve as a driving force for discussion with the next generation on their expected inheritance and aligning their own values to their wealth.
We believe that conversations around purpose can help to focus the mind and align the client and the next generation around a common goal.
As we look to create a seamless and aligned wealth transfer, it is more important than ever to include the next generation in conversations around succession planning. Communication is critical in ensuring effective succession planning and avoiding future conflict.
