12 March 2008
Darling Delivers Dull Speech
“The Chancellor did not produce any rabbits out of his hat so his speech conformed to the recent trend for March Budget speeches of being pretty dull from a personal financial and tax-planning viewpoint,” said Paul Tobias, Head of Hart Brown’s Trust & Investment Department, after Alistair Darling’s Budget Speech of 12 March.
Paul added, “From an initial review of the speech and supporting information, Mr Darling has simply confirmed measures relating to IHT, CGT and savings that had already been proposed.“ These included:
- Inheritance tax – the nil rate band exemption will increase from £300,000 to £312,000 from 6.4.08 and the transferable allowance is confirmed.
- Capital gains tax – indexation allowance and taper relief will be abolished from 6.4.08 and a new flat rate of CGT of 18% will apply from that date.
- ISAs and PEPs – the maximum investment will increase from £7,000 to £7,200 from 6.4.08 and PEPs will be converted to ISAs.
- Insurance bonds – the internal rate of tax payable on insurance bonds will remain at 20%.
Paul commented further: “The IHT transferable allowance will simplify will planning for married couples and civil partners and will involve a bonus allowance in that it will be calculated as a percentage of the nil rate band when the second party dies, rather than being fixed on the first death.
“Although simplification of the CGT regime is welcome, overall I remain unhappy with the CGT changes, which appear likely to benefit short-term investors but penalise long-term investors and entrepreneurs, which seems wrong in principle. I am concerned that indexation allowance and taper relief that were already “in the bank” are being taken away. It is worrying that the government seems progressively more willing to introduce retrospective tax legislation of this kind.
“The increase in the ISA investment limit is overdue but so small as to make little difference. However, the conversion of PEPs to ISAs is a sensible tidying-up measure.
“The retention of the 20% internal tax rate for investment bonds makes this form of investment marginally less attractive than previously when compared with, for example, a unit trust portfolio, where the CGT rate will in future be 18%.
“All of the above had been flagged up previously, hence my overall conclusion that the Budget Speech was pretty dull. We can however be grateful that Mr Darling produced no really nasty surprises and must hope that the stability to which he referred so many times will help see us through the present economic downturn.”
For further advice, or to arrange an appointment with one of Hart Brown’s Trust & Investment experts, please contact Paul Tobias - Head of our Trust & Investment Department - by calling 01483 887766
For further information about Hart Brown solicitors call 01483 887766.