Most people including myself got the General Election wrong and the predicted hung parliament turned out to be an all Blue Conservative government.
So what will this mean for pension and IHT planning?
One big change that will not materialise, is the plan to scrap the non-domiciled tax which was proposed by the Labour Party and I can’t see the Conservatives adopting this moving forward, so any planning for this area of non-domiciles is now null and void.
One of the most interesting results was across the Scottish and English border and all but three seats ended up going to the Scottish National Party. This in hindsight should have been expected; however, such a large swing was certainly the main result that got most people talking.
It will be interesting to see how those last three seats fair in the next general election? This result has reinvigorated Scottish nationalism and should in fact mean a revisit to a Scottish referendum; which many, including myself, see as being successful this time around.
In addition to this, a number of longstanding MP’s have now lost their seats and parliament will be brimming with fresh new and happy faces. This can only be seen as a positive, by the fact that MP’s holding seats for decades, can become too comfortable and a fresh view can be what is needed to improve the government.
Now that the election is over I feel that we can see a more aggressive movements to hit higher rate tax earners with assets inside the UK. But before we get onto this, let’s begin with some positives.
Cameron’s did pledge to increase the IHT threshold, but not by its usual figures seen below; it will be by allowing families to pass on their family homes, worth up to GBP1 million tax free! This slightly unusual increase is long overdue and below shows how the nil rate band has changed since the turn of the century.
|FROM||TO||IHT THRESHOLD /NIL RATE BAND|
|6 April 2009||–||£325,000|
|6 April 2008||5 April 2009||£312,000|
|6 April 2007||5 April 2008||£300,000|
|6 April 2006||5 April 2007||£285,000|
|6 April 2005||5 April 2006||£275,000|
|6 April 2004||5 April 2005||£263,000|
|6 April 2003||5 April 2004||£255,000|
|6 April 2002||5 April 2003||£250,000|
|6 April 2001||5 April 2002||£242,000|
|6 April 2000||5 April 2001||£234,000|
As you can see, the rates have not changed since 2009 and to allow a GMP1 million home to pass freely is a very attractive tax incentive indeed. So although the higher rate tax earners may be getting hit with more taxes, they will certainly be looking to take benefit from the above.
More positive news is the fact that the Conservatives have pledged to raise the 40% income tax threshold to GBP50,000 and to keep National Insurance contributions the same, along with the VAT rate. It is sometimes difficult to ascertain who to vote for, with regards to taxes, but the Conservatives really have promised a positive stance.
Now onto a negative for pensions…..
The Conservative Party had proposed restricting tax relief on pension contributions for those earning in excess of £150,000 a year.
Previously you could utilise your allowance from the previous three tax years and it will be interesting to see whether this will now be curbed moving forward. This is one area the wealthy get hit, however with the new IHT plan, I feel that they will accept this without too much pain.
So in my opinion, what’s next…..
A referendum on staying within the EU is promised for 2017 and I personally don’t know which way this will go. There are positives and negatives on both sides of the fence and Nigel Farage has played a positive role in getting the Conservatives to address the immigration issue, which is what I feel most Brit’s have a grievance with. UKIP got the third highest votes, even though they only obtained one seat and these votes were mainly gained by the immigration issue that Britain has been deemed to have.
Angela Merkel has made it very clear that we can’t opt out of the freedom of movement act, but maybe the UK can opt out and take up a more Norwegian stance on this matter!
Norway are part of the economic area, but not part of the EU and in my opinion is the perfect model for Britain.
This will not happen for a couple of years, but could give rise to volatility and uncertainty in the GBP and its markets. This being said, many companies on the FTSE are global and should not be greatly affected by either result.
Facts and figures…..
There could be changes to the way the voting system is done in the future, again this is because of Nigel Farage’s UKIP, which had 3.86m votes for its one seat in Parliament, as opposed to SNP who had an average of 26,000 and the conservatives with 34,000. Labour had 40,000 and the Lib Dem’s 299,000.
An interesting fact is that 24.2% of the seats would be held by a different party if a proportional voting system were implemented. Even more worrying is that 63% of the total votes were for losing seats, hence a change in the system maybe warranted.
I hope that you have enjoyed reading this post.
Kuala Lumpur : Malaysia