2013 Budget
We asked our independent economic consultant Peter Stanyer for a brief overview of his first impressions.
- A business friendly Budget, which will help employment.
- Tax deductibility of child care costs will also help employment.
- It supports current high levels of house prices by subsidising mortgages (which is probably not a good thing in the long run) but by directing first time buyers towards new build homes, it will help the construction industry and employment.
In a hostile environment, the Budget offered about as much as could be hoped for. By the time of the next election, growth will probably still be disappointing, the deficit will still be depressingly high, but unemployment may be much lower than many might have feared.
Cyprus plans raid on deposits
Will there be knock on effects?
Cyprus is now the fifth eurozone country to require a bail out to recapitalise the country’s banking sector.
One of a number of measures currently being proposed is a one-time tax on bank deposits, which will unnervingly extend to deposits below the €100,000 compensation limit and ‘guarantee’ which applies across Europe. Savers will be ‘compensated’ with bank equity as well as bonds linked to natural gas revenues, but this has not eased the anger that many Cypriots (and ex-pats) feel.
Reaction to the bail-out plan has been mixed with Germany not surprisingly in favour of the plan, whereas Russia is strongly opposed with President Vladimir Putin calling the measures “unfair, unprofessional and dangerous”.
Planning pays off as FPC clients secure their long-term future
Car parts distributor acquired in multi-million pound deal
FPC clients, Howard Warren and Charles Colton recently welcomed a significant investment into their business from HgCapital, a London-based private equity firm. They remain directors in the business and are actively supporting HgCapital in its growth strategy with three further acquisitions already completed.
An integral part of our success
Howard Warren and Chas Colton:
“FPC has been an integral part of our success for over 20 years. When we met, our turnover was £3 million and we had 50 staff; by 2013, we had achieved a turnover of £50 million and a team of 500!
Moira and the team at FPC have been by our side throughout our journey, helping us to deal with all the challenges along the way. Their straight talking and understanding of us as a company and as individuals, has meant our financial planning has always focused on the needs of both.
Thanks to FPC’s sound investment advice, we have achieved the financial independence we aspired to whilst securing the long term future of the business we care so passionately about.
We would encourage fellow business owners to take action to review their position and make their own personal financial planning their priority in 2013.”
The culmination of careful planning
Partner, Moira O’Shaughnessy advises many of our corporate clients on business succession and exit planning issues. She explains how FPC can help clients plan the future they want for themselves and their business.
The UK loses its Aaa rating from Moody’s
A downgrade that’s more a reminder than a surprise
According to Peter Stanyer, our independent economist, the downgrade simply reminds us that economic progress has been disappointingly slow. We asked Peter to put Moody’s downgrade into perspective and explain what it really means.
The Chancellor’s Autumn Statement
An economist’s view: Peter Stanyer
This Autumn Statement from the Chancellor is in effect a mini-budget. There were important announcements about the detail of tax, but from an economic perspective, the main message was “more of the same”, with further downgrading of forecasts for future growth and for cutting the budget deficit.
Pensions in the Autumn Statement
Mixed news for pension holders
For those already drawing down income…the good news
As you will know, the lower drawdown limit that came into force from April 2011 together with plummeting gilt yields dramatically reduced the income pensioners could take each year.
In his Autumn Statement, Osborne has said, “I have listened to concerns from pensioners about drawdown limits”. He then went on to announce that the capped drawdown limit would be raised from 100% to 120% of the equivalent GAD annuity rate – reversing the changes that came into force in April last year.
Do you need to set up a staff pension scheme ‘now’?
Don’t panic – the answer is ‘not yet’!
A few of our business owner clients have told us they are concerned about the impact of Auto Enrolment and NEST. Some have been contacted by their bank and been given the impression that they had to set up a pension arrangement for their staff ‘now’ – in 2012.
Although Auto Enrolment is being phased in for all employers from October 2012, it is only likely to become compulsory for most of our clients from 2014 at the earliest. So unless you were already planning on setting up a pension scheme now, don’t worry; there is still plenty of time.
A New Year Revolution?
How the Retail Distribution Review will, or rather won’t, affect you
Changes in legislation from January 2013 mean that many investment companies and financial advisers will need to dramatically change how they do business. Fortunately we’re not one of them.
The future of Inheritance Tax
“No longer fit for purpose”?
Inheritance Tax (IHT) remains unpopular with the general public and has been the subject of a long-running campaign in a national newspaper calling for its abolition. That’s a lot of attention for a tax that was paid by only 3% of estates in 2008/09 and raised just 0.5% of all tax revenue in 2009/10.
The recent Mirrlees Report, published by the Institute of Fiscal Studies, has concluded that “Inheritance Tax is no longer fit for purpose.”
FPC Financial Planner, Paul Welsh has explored the implications for our clients and shares his findings below:
This report attempted to explore and define the characteristics of a good tax system and then went on to recommend various changes that would affect estate planning strategies, including the following:
- Replace IHT with a ‘wealth transfer tax’, whereby any gift made by an individual during their lifetime or upon death is subject to a tax charge.
- As an absolute minimum, the exemption for business property and agricultural property should be restricted. It currently enjoys a 100% relief in most circumstances.
- The capital gains tax exemption that applies on death (where the ‘cost’ value of an asset is rebased to its value at the date of death) should be removed.
Inevitable change?
Policymakers may well disregard this independent academic study, but given IHT’s unpopularity, it is easy to envisage that politicians may attempt to curry favour with voters by making major changes to the IHT system.
In addition, the recommendations in this report follow an analysis by the Office of Tax Simplification, which states that IHT requires a complete overhaul. The call for change, therefore, appears to be gathering steam!
Our view
Anyone who is contemplating estate planning strategies such as gifting programmes, business exit planning and trust planning, may well be wise to take advantage of the current exemptions whilst they still exist.
Estate planning is always on our ongoing review agenda, but do call us for guidance now if you feel you need to understand your position and options in more detail.
Also remember, if you have friends or clients with similar concerns, we can help them too, so encourage them to visit our services
Pensioners and the tax and benefit system
The Institute of Fiscal Studies has just published a report investigating reforms that might both rationalise the tax and benefit system for pensioners and raise revenue to pay for the Dilnot Commission’s proposals on the Funding of Care and Support. The main beneficiaries of these changes would be pensioners with higher levels of income or significant assets.
