Welcome to the third episode of our First 100 Days in Office podcast series, where we will delve into the Labour Party’s policies and how these could impact individuals.
Following Rachel Reeve’s announcement this week that the Government would have to raise taxes to claw back some of the £22bn debt in public spending, we will look at potential changes to IHT, CGT and pensions as well as the confirmed changes to VAT on school fees the non-domicile regime.
Chairing the latest episode is Sean Cockburn, a Private Client Tax Director who specialises in international private client tax.
Joining Sean is
For more information on our tax services visit our website.
The information contained in this podcast does not constitute individual advice. Forvis Mazars LLP will not accept any responsibility for decisions taken or not taken on the basis of the information presented. Always obtain independent, professional advice relevant to your own circumstances.
Any reference to legislation and tax is based on Forvis Mazars LLP's understanding of United Kingdom law and HM Revenue & Customs practice at the date of production. These may be subject to change in the future. Tax rates and reliefs may be altered. The value of tax reliefs to the investor depends on their financial circumstances. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments.
Forvis Mazars LLP is the UK firm of Forvis Mazars Group, an international advisory, and accountancy organisation, and is a limited liability partnership registered in England with registered number OC308299. A list of partners’ names is available for inspection at the firm’s registered office, 30 Old Bailey, London, EC4M 7AU.
00:00:06:11 - 00:00:09:14
Welcome to the third
episode in our First 100 days in office
00:00:09:14 - 00:00:13:02
podcast series, where we will delve
into the elected party's policies
00:00:13:09 - 00:00:16:09
and how these could impact
sectors, businesses and individuals.
00:00:17:10 - 00:00:20:06
On Monday, the new chancellor,
Rachel Reeves, announced cuts
00:00:20:06 - 00:00:23:20
to public spending in a bid to claw back
some of the debt owed by the UK.
00:00:24:07 - 00:00:28:07
She promised once again not to raise
working taxes like national insurance,
00:00:28:07 - 00:00:31:23
income tax or VAT, but has said
there will be challenging trade offs,
00:00:31:23 - 00:00:34:23
which we expect to be announced
in the budget on the 30th of October.
00:00:35:21 - 00:00:39:07
Today we're going to look
at some of the potential tax changes
00:00:39:07 - 00:00:42:07
Labour could make, particularly
to pensions and capital taxes,
00:00:42:16 - 00:00:45:07
as well as changes
that have already been confirmed,
00:00:45:07 - 00:00:49:02
including VAT on school fees
and closing the non-dom tax loopholes.
00:00:50:00 - 00:00:52:17
I'm Sean Cockburn,
Private Client Tax Director,
00:00:52:17 - 00:00:56:06
and today I'm joined by the Head of
International Private Client Paul Barham,
00:00:56:14 - 00:00:59:16
Rebecca Park, an Associate Director
in the Private Client Tax team.
00:00:59:22 - 00:01:02:12
James Robinson,
a Senior Financial Planner.
00:01:02:12 - 00:01:05:12
And Jamie Hyne,
one of our VAT Specialists.
00:01:05:15 - 00:01:06:15
Paul.
00:01:06:15 - 00:01:08:04
In March, the previous government
00:01:08:04 - 00:01:11:18
announced proposals to abolish
the existing non-dom regime and replace it
00:01:11:18 - 00:01:15:06
with a residence based test for income tax and capital gains tax.
00:01:15:18 - 00:01:18:07
Labour made a clear statement
that they will close the tax
00:01:18:07 - 00:01:20:10
loopholes for non-dom individuals.
00:01:20:10 - 00:01:23:14
But do we know anything more
about their plan for the non-dom regime?
00:01:24:07 - 00:01:25:20
So the podcast is quite timely.
00:01:25:20 - 00:01:28:18
HMRC published a policy paper
earlier this week
00:01:28:18 - 00:01:31:11
and whilst we still have to wait
for the budget on the 30th of October
00:01:31:11 - 00:01:34:15
for more detail, the update sets out
the direction of travel.
00:01:35:08 - 00:01:37:13
The highlights of this include.
00:01:37:13 - 00:01:40:09
The domicile regime will be replaced
by a residency
00:01:40:09 - 00:01:43:09
based test from the 6th of April 2025.
00:01:44:00 - 00:01:46:14
The new foreign income and gains or fake
00:01:46:14 - 00:01:51:19
regime announced previously will remain,
which gives 100% relief from UK
00:01:51:19 - 00:01:54:19
taxation of foreign income and gains
for new arrivals
00:01:54:19 - 00:01:58:15
to the UK in the first
four years of residency, provided
00:01:58:15 - 00:02:02:16
they have not been UK resident
in any of the ten years prior to arrival.
00:02:03:19 - 00:02:07:08
The protection from tax on income
and gains arising in separate interested
00:02:07:08 - 00:02:11:23
trusts will no longer be available
to non-doms and domiciled individuals
00:02:11:23 - 00:02:14:23
who would not otherwise qualify
for the four year security
00:02:16:00 - 00:02:19:14
review of the existing offshore
anti-avoidance legislation
00:02:19:18 - 00:02:22:15
to be undertaken. This includes
the complex
00:02:22:15 - 00:02:25:15
transfer addresses abroad and settlements
legislation.
00:02:25:16 - 00:02:29:17
Any changes aren't expected to come
through before the 6th of April, 2026.
00:02:30:22 - 00:02:35:04
And lastly, a form of overseas
work day relief will remain required.
00:02:35:06 - 00:02:38:06
What that looks like remains to be seen.
00:02:38:20 - 00:02:41:13
Some of the transitional rules
previously announced will not come in
00:02:41:13 - 00:02:44:16
now, whilst others will be refined
and possibly widened.
00:02:45:11 - 00:02:49:21
The one year 50% reduction on non UK
income, subject to tax,
00:02:49:21 - 00:02:51:20
that was proposed
under the previous government
00:02:51:20 - 00:02:56:05
to allow existing remittance bases
uses to transition into the new regime
00:02:56:05 - 00:02:57:09
will not be introduced.
00:02:58:08 - 00:03:00:17
The date at which assets are rebased
for capital gains
00:03:00:17 - 00:03:04:01
tax purposes will be reviewed
and announced in the budget.
00:03:05:08 - 00:03:07:05
Temporary repatriation
00:03:07:05 - 00:03:10:06
facility, or TRF will still apply,
00:03:10:06 - 00:03:14:04
allowing Unremitted foreign income
in gains that arose prior to the sector.
00:03:14:04 - 00:03:18:15
April 2025 to be remitted
for a limited time at a reduced rate.
00:03:19:04 - 00:03:21:21
But what that rate is,
and for what period of time
00:03:21:21 - 00:03:24:21
it will apply, are now to be announced
later on in the year.
00:03:26:02 - 00:03:27:11
The government also announced that
00:03:27:11 - 00:03:30:11
it is exploring ways
to expand the scope of TRF
00:03:30:11 - 00:03:34:05
to include stock, part income and gains
within overseas structures.
00:03:34:11 - 00:03:37:12
Again, details of that are expected
in the budget.
00:03:38:15 - 00:03:41:11
And lastly, changes
to the application of inheritance
00:03:41:11 - 00:03:44:11
tax under a residency
based system are still to be announced.
00:03:44:16 - 00:03:46:11
But the ten year residency concept
00:03:46:11 - 00:03:49:22
is still expected to be introduced
from the 6th of April 2025.
00:03:50:13 - 00:03:53:16
The government will also set out
how will end the use of excluded property
00:03:53:16 - 00:03:57:06
trusts as a way of keeping assets
out of the scope of IHT.
00:03:57:17 - 00:04:01:05
It is still looking at appropriate
adjustments to existing arrangements,
00:04:01:22 - 00:04:04:08
so some pretty significant changes there.
00:04:04:08 - 00:04:07:08
What should those who are impacted by
these rules do now?
00:04:07:11 - 00:04:09:17
I think there's now
some opportunity for Non-Doms
00:04:09:17 - 00:04:13:02
to start to formalise
their strategic plans and execute
00:04:13:02 - 00:04:16:19
at least some of those determining
whether to crystallise
00:04:16:19 - 00:04:20:12
foreign income gains
or after the 6th of April 2025.
00:04:20:22 - 00:04:24:06
The timing of any remittance
and making a remittance basis claim
00:04:24:06 - 00:04:25:20
this year is becoming clearer.
00:04:27:04 - 00:04:30:04
Those thinking of establishing a UK
tax residency can review
00:04:30:04 - 00:04:33:06
whether they can trigger
that after the 6th April 2025,
00:04:33:17 - 00:04:36:13
and not in this tax year,
so they can maximise
00:04:36:13 - 00:04:39:13
the use of the new regime.
00:04:39:15 - 00:04:43:07
Those with offshore trust structures
now know that the existing tax regime
00:04:43:07 - 00:04:45:21
will change, with further details
not coming
00:04:45:21 - 00:04:48:18
until at least the 30th October.
00:04:48:18 - 00:04:51:19
They should be looking to ensure they have
at least reviewed the suitability
00:04:51:19 - 00:04:55:05
of their structures
and their trusts, the assets that are held
00:04:55:15 - 00:05:00:05
so that they can execute any action
and finalise any changes
00:05:00:05 - 00:05:03:17
to their strategy over the long term
as soon as the details are available.
00:05:04:10 - 00:05:05:06
Thanks, Paul.
00:05:05:06 - 00:05:07:13
So for Non-Doms,
we know the changes are coming
00:05:07:13 - 00:05:09:21
and we have some information
on where they are heading,
00:05:09:21 - 00:05:13:10
but it's still a waiting game
for some and moving on.
00:05:13:13 - 00:05:17:19
One Labour pledge that has been confirmed
is that VAT will be applied
00:05:17:19 - 00:05:21:07
on private school fees
from the 1st of January, 2025.
00:05:22:00 - 00:05:25:03
The Chancellor also confirmed on Monday
that any fees paid
00:05:25:03 - 00:05:29:20
from the 29th of July, 2024,
pertaining to the term from January
00:05:29:20 - 00:05:34:11
25th onwards will be subject to VAT jemmy,
with this additional cost
00:05:34:11 - 00:05:36:02
being applied to private schools.
00:05:36:02 - 00:05:39:02
What could this mean for those paying
school fees and schools themselves?
00:05:40:02 - 00:05:43:06
So in the first instance, I think
the biggest, the biggest change will see
00:05:43:06 - 00:05:46:06
is that the size of the schools
affected by the changes will change.
00:05:47:03 - 00:05:50:05
and so at the moment we expect
the most private schools
00:05:50:05 - 00:05:52:02
would either be not registered for VAT
00:05:52:02 - 00:05:55:02
or they be registered,
but mainly making exempt supplies.
00:05:55:11 - 00:05:58:19
instead the school is going to be making
principally taxable supplies.
00:05:58:19 - 00:06:02:12
Subject to that at the standard rate,
and likely to register
00:06:02:12 - 00:06:05:12
that as a result of that,
the likely breach of thresholds.
00:06:06:01 - 00:06:09:01
and so for the schools that are registered
for that at the moment,
00:06:09:01 - 00:06:11:08
there's going to be
an increased administration,
00:06:11:08 - 00:06:14:08
administration burden
in terms of finding that returns,
00:06:15:02 - 00:06:18:19
performing business and non-business
calculation part exemption calculations
00:06:19:01 - 00:06:22:01
and dealing with any future
HMRC, HMRC compliance reviews.
00:06:22:16 - 00:06:25:04
and we would imagine that
with a major change like this,
00:06:25:04 - 00:06:28:21
there could be a potential increase
in in those views of HMRC.
00:06:28:21 - 00:06:31:13
Obviously with new legislation
coming through,
00:06:31:13 - 00:06:33:23
it's going to be quite
a key area of risk for HMRC.
00:06:35:05 - 00:06:38:05
now with the private
schools expected to be registered for VAT,
00:06:38:09 - 00:06:41:09
it's likely that that will become
chargeable on other income streams
00:06:41:09 - 00:06:44:09
that schools generate as well,
not just the school fees.
00:06:44:11 - 00:06:46:19
which will create a question
around the liability
00:06:46:19 - 00:06:49:12
of all the income streams
held by the businesses.
00:06:49:12 - 00:06:52:10
the HMRC initial guidance
on the matter confirms
00:06:52:10 - 00:06:56:12
that other closely related goods
and services other than boarding, i.e.
00:06:56:18 - 00:06:59:04
goods and services
that are provided by a private school
00:06:59:04 - 00:07:02:01
for the direct use of their pupils,
and that the necessary
00:07:02:01 - 00:07:05:14
for delivering education to their pupils
will remain exempt from VAT.
00:07:06:01 - 00:07:09:12
However, the private schools will need
to charge that on any additional supplies
00:07:09:12 - 00:07:13:15
of education that they charge a fee
for after school hours or during holidays.
00:07:15:03 - 00:07:18:03
so essentially, as a result of this,
the private schools
00:07:18:05 - 00:07:22:08
are going to be required to account
for that to 20% on the relevant services,
00:07:22:13 - 00:07:27:04
potentially resulting in either
a 20% increase in prices for the CPS, i.e.
00:07:27:04 - 00:07:29:05
the parents of the of the children.
00:07:30:19 - 00:07:33:00
or they'll
face a tightening of the school's margins.
00:07:33:00 - 00:07:36:03
If prices aren't increased and passed
on, any potential price
00:07:36:03 - 00:07:39:07
increase will present an issue
for a large number of parents.
00:07:40:02 - 00:07:43:07
We expect this is more likely to be
that the end result will be somewhere
00:07:43:07 - 00:07:44:06
in between.
00:07:44:06 - 00:07:47:16
As a result of the schools being entitled
to recover some of the that they incur
00:07:47:16 - 00:07:51:02
going forward, which may mitigate
any potential cost increases.
00:07:51:07 - 00:07:54:17
However, it remains to be seen
how much of this cost increase
00:07:54:22 - 00:07:58:21
will be passed on to the parent with
the potential changes coming into play.
00:07:59:04 - 00:08:01:02
This, both the schools and the parents
00:08:01:02 - 00:08:03:02
should ensure
that they're set up for these changes,
00:08:03:02 - 00:08:04:15
so the schools should ensure
00:08:04:15 - 00:08:07:17
they are set up contractually
to enable them to increase their prices.
00:08:07:23 - 00:08:09:09
When that becomes chargeable,
00:08:09:09 - 00:08:11:15
and the parents should ensure
that are aware of how the changes
00:08:11:15 - 00:08:14:15
will likely impact their individual school
and circumstances.
00:08:15:02 - 00:08:17:19
Okay, so we've known
this was likely to happen,
00:08:17:19 - 00:08:21:16
and we've heard of parents paying for
multiple years of school fees in advance.
00:08:22:14 - 00:08:23:11
is this possible?
00:08:23:11 - 00:08:25:20
And how would VAT be applied here?
00:08:25:20 - 00:08:29:01
So the idea of encouraging early payments
multiple years in advance
00:08:29:01 - 00:08:29:21
has been floated
00:08:29:21 - 00:08:32:23
as a potential option to keep school fees
that exempt for as long as possible.
00:08:33:16 - 00:08:37:01
and the idea of this is to create
an earlier tax point
00:08:37:01 - 00:08:40:04
at the date of payment
before the change to keep schools
00:08:40:04 - 00:08:43:04
school fees
within the scope of the exemption.
00:08:43:12 - 00:08:46:11
and the guidance set out by HMRC confirms
that these arrangements
00:08:46:11 - 00:08:48:00
will be challenged.
00:08:48:00 - 00:08:48:19
this is on the basis
00:08:48:19 - 00:08:52:13
that early payments may not have created
a created a genuine tax point
00:08:52:20 - 00:08:57:01
and are simply holding for future terms
payment, which is drawn down each term.
00:08:57:14 - 00:09:00:21
The risk for the schools is that if
HMRC disagrees with the approach,
00:09:01:01 - 00:09:04:15
it may result in a VAT dispute
and protracted correspondence,
00:09:04:20 - 00:09:07:20
which may ultimately result
in a significant liability,
00:09:07:20 - 00:09:09:18
interest and potential penalties.
00:09:09:18 - 00:09:10:12
If this does.
00:09:10:12 - 00:09:11:18
If this does happen,
00:09:11:18 - 00:09:14:18
will the school be able to charge
the additional back to the parents?
00:09:14:21 - 00:09:18:14
And this sort of comes back to the initial
point around the contractual position,
00:09:19:04 - 00:09:20:15
for the schools and the parents.
00:09:22:06 - 00:09:25:22
HMRC have confirmed that any payments
from the 29th of July 2024
00:09:25:22 - 00:09:30:09
pertaining to the term starting in January
2025 onwards will be subject to that
00:09:30:13 - 00:09:33:11
and this is evidence of HMRC ensuring
that the changes are,
00:09:33:11 - 00:09:36:11
in their opinion
that all users of private schools.
00:09:37:02 - 00:09:38:06
There's been no further guidance
00:09:38:06 - 00:09:41:06
at this stage on
if any payments have been made to date.
00:09:41:18 - 00:09:44:18
but I think there will be some updates
on this in due course.
00:09:45:17 - 00:09:47:01
Thanks, Jamie.
00:09:47:01 - 00:09:50:02
so given that we expect
a large proportion of the cost
00:09:50:02 - 00:09:53:02
to be passed on to parents,
it might be worth bringing in James here.
00:09:53:20 - 00:09:57:22
James, how could parents or guardians
look to fund this additional cost?
00:09:59:15 - 00:10:02:15
given the unexpected
nature of the expenditure.
00:10:03:04 - 00:10:06:20
So, as Jamie was saying earlier,
that it's not going to be totally clear
00:10:07:09 - 00:10:10:01
what the increase of cost
is going to be for parents.
00:10:10:01 - 00:10:12:09
But in conversations
that I've been having with clients,
00:10:12:09 - 00:10:15:08
I think the reasonable thing to assume
is, well,
00:10:15:08 - 00:10:17:10
it costs are going to be going up by 20%.
00:10:17:10 - 00:10:18:16
But first thing
00:10:18:16 - 00:10:22:13
to do is to try and speak to the school,
to see to what extent they expect.
00:10:22:13 - 00:10:24:09
Any reclaim
could help reduce some of the costs.
00:10:24:09 - 00:10:28:01
But just for discussion purposes,
let's assume the 20% it's being added.
00:10:29:03 - 00:10:29:13
there's no
00:10:29:13 - 00:10:33:07
magic wand or secret way of helping deal
with this, other than it therefore
00:10:33:07 - 00:10:36:08
seems like families are going to need
to find an extra 20%,
00:10:37:06 - 00:10:39:10
out of their budgets
to help meet this increased cost.
00:10:39:10 - 00:10:42:10
So any family members
paying for school fees
00:10:42:10 - 00:10:45:07
need to be ever more mindful
of how they're going to be meeting.
00:10:45:07 - 00:10:47:17
This increased cost for parents
is going to be a keen
00:10:47:17 - 00:10:52:03
focus on overall expenses, and
where they can generate this extra income.
00:10:52:12 - 00:10:55:12
If they do have some existing savings
already, then,
00:10:56:06 - 00:10:59:22
in this higher interest rate environment,
it's possible to create more genuine
00:10:59:22 - 00:11:03:11
income from savings,
but it's going to require some reasonable
00:11:03:11 - 00:11:06:19
savings to actually create enough income
to meet this difference in the cost.
00:11:06:19 - 00:11:09:19
Depending on what the overall
cost of school fees are for them.
00:11:09:21 - 00:11:12:19
it may even mean that some need
to read their savings capital to
00:11:12:19 - 00:11:16:06
to meet these expense, or even possibly
think about reducing their future savings.
00:11:16:06 - 00:11:17:10
That is really good.
00:11:17:10 - 00:11:20:21
That needs, some thorough
thought of what the families
00:11:20:21 - 00:11:24:11
objectives are and how it is
they prioritise them effectively.
00:11:24:11 - 00:11:27:23
If it is going to be a challenge
to meet these expenses as well as others.
00:11:28:19 - 00:11:31:06
it's also worth
thinking about any other family members
00:11:31:06 - 00:11:34:07
that might be helped
to meet school fees for for family.
00:11:34:07 - 00:11:36:18
So the classic
one is what is grandparents?
00:11:38:00 - 00:11:38:11
they should do
00:11:38:11 - 00:11:41:11
the same when again,
considering the affordability as parents,
00:11:41:11 - 00:11:45:12
but they also have to think about what
it means, their IHT position and whether
00:11:45:12 - 00:11:48:17
if they're making gifts, does it form
part of their seven year clock?
00:11:49:21 - 00:11:52:17
if they were previously using their gifts
00:11:52:17 - 00:11:56:10
out of income exemption
so it could be free of inheritance tax,
00:11:57:02 - 00:11:59:03
that needs to be thinking about
whether their income
00:11:59:03 - 00:12:02:16
is sufficiently high enough
that it's still meeting these expenses
00:12:02:16 - 00:12:05:16
without reducing their own,
standard of living.
00:12:06:06 - 00:12:09:16
this could lead to more grandparents
passing funds over to grandchildren
00:12:09:16 - 00:12:13:09
or into trust, and all to help protect
against this to or even start using
00:12:13:09 - 00:12:14:19
the child's income allowances.
00:12:14:19 - 00:12:17:19
But careful thought is needed
before doing anything like that.
00:12:19:04 - 00:12:20:08
Thank James.
00:12:20:08 - 00:12:22:21
if we just stay with you for the moment
and look forward to
00:12:22:21 - 00:12:25:11
what could be announced in October's
budget.
00:12:25:11 - 00:12:28:11
Pensions have been an area of focus
for Labour in the past,
00:12:28:13 - 00:12:31:08
and have been rumours
that they could change several elements
00:12:31:08 - 00:12:35:04
of pension taxation,
including the age at which you can access
00:12:35:04 - 00:12:38:04
your pension, changes to the tax free lump
sum amount
00:12:38:13 - 00:12:42:00
and the rate of tax relief
you can receive on pension contributions.
00:12:42:18 - 00:12:43:07
Do you think
00:12:43:07 - 00:12:46:21
any of these rumours could be true
and how would the impact individuals?
00:12:47:16 - 00:12:50:03
It's a very mean question,
Sean. Thank you.
00:12:50:03 - 00:12:50:16
that's
00:12:52:03 - 00:12:52:08
that.
00:12:52:08 - 00:12:56:19
Well, those, the in the King's speech
on the 17th of July announced,
00:12:57:16 - 00:13:00:13
a new, pensions bill
that was going to be coming through.
00:13:00:13 - 00:13:03:13
But this is largely focussed on
00:13:04:12 - 00:13:07:12
looking at how pension schemes
could be better administered
00:13:07:12 - 00:13:09:03
and try to achieve better outcomes
00:13:09:03 - 00:13:11:03
with the underlying investments
and how they're monitored
00:13:11:03 - 00:13:14:03
and how people can consolidate
their pensions more effectively.
00:13:14:21 - 00:13:17:21
where we think where we do think about,
00:13:18:13 - 00:13:21:13
change in taxation around pensions that
00:13:21:17 - 00:13:25:14
there wasn't really much mentioned
in, in the, in the King's Speech.
00:13:25:14 - 00:13:29:23
And there was also some commentary
from Steve Webb,
00:13:29:23 - 00:13:34:15
a previous pensions
minister, saying that the policies
00:13:34:15 - 00:13:37:22
or being covered under that pensions
bill were very similar
00:13:37:22 - 00:13:40:14
to what a conservative government
would probably be considering anyway.
00:13:40:14 - 00:13:42:02
So we've not seen any
00:13:42:02 - 00:13:45:02
wide sweeping changes
as a result of this new Labour government.
00:13:45:09 - 00:13:51:04
Now, when we talk about changes
in taxation, on, on pensions,
00:13:51:09 - 00:13:53:16
what does keep coming up
is the lifetime allowance
00:13:53:16 - 00:13:56:16
that the conservative government
removed it a year or so ago.
00:13:57:12 - 00:14:00:12
that when that was first announced
that it was being removed,
00:14:00:12 - 00:14:01:21
Labour did come out and say that
00:14:01:21 - 00:14:04:23
to be looking to introduce
a lifetime allowance as soon as possible.
00:14:06:00 - 00:14:08:01
they've since distanced themselves
from those comments.
00:14:08:01 - 00:14:11:02
I say Labour since distanced themselves
from those comments,
00:14:11:11 - 00:14:13:01
and since the election they've confirmed
00:14:13:01 - 00:14:16:00
they won't be looking at bringing
the lifetime allowance back in.
00:14:16:21 - 00:14:19:14
the central consideration,
as you mentioned, Sean,
00:14:19:14 - 00:14:23:23
is whether they look to change
tax relief on pension contributions
00:14:23:23 - 00:14:28:05
and move from marginal rates of income tax
relief to a flat rate of relief.
00:14:29:10 - 00:14:32:13
this has been a topic over
the last few years.
00:14:32:13 - 00:14:35:13
And again,
the same expenses Minister Steve Webb has
00:14:35:14 - 00:14:38:21
previously talked on webinars
and presentations in the past about.
00:14:39:03 - 00:14:43:14
He's looked at this as an option,
but it just proved way too complicated
00:14:43:14 - 00:14:46:17
to be able to be properly implemented
as it cause a lot of issues
00:14:46:17 - 00:14:49:17
with defined benefit
pensions and public sector pension schemes
00:14:50:04 - 00:14:52:07
and how they could operate
so as a possibility.
00:14:52:07 - 00:14:54:07
But it feels like an outside one.
00:14:55:22 - 00:14:57:01
what does
00:14:57:01 - 00:15:01:08
feel like it's more open to challenge
or change
00:15:01:17 - 00:15:05:08
is reconsidering how death benefits for
pensions are taxed.
00:15:06:03 - 00:15:09:05
There has been a cap introduced
on the lump sum death benefits
00:15:09:05 - 00:15:11:19
that can be passed on
tax free to beneficiaries,
00:15:11:19 - 00:15:16:17
but it's still possible to leave pension
benefits within a beneficiary pension and
00:15:16:17 - 00:15:20:18
not crystallise an immediate tax charge
and just defer the tax indefinitely.
00:15:21:01 - 00:15:24:07
And we're definitely seeing an increase
in individuals looking to make use of this
00:15:24:07 - 00:15:29:07
and pass pension funds on a tax efficient
way to to me, it would make sense if,
00:15:29:19 - 00:15:34:20
if the government exchanged this tax free
or tax deferred nature of the pension
00:15:34:20 - 00:15:40:04
schemes to create some kind of charge
on death to accelerate tax receipts.
00:15:40:04 - 00:15:41:11
So that's the regime.
00:15:41:11 - 00:15:43:19
We had about three 2015.
00:15:43:19 - 00:15:47:18
There used to be a 55% tax charge on
pension death benefits to reflect the fact
00:15:47:18 - 00:15:50:23
that you've had some income tax relief
to increase the value of fund,
00:15:50:23 - 00:15:53:23
and then trying to replicate
some inheritance tax in some way
00:15:54:01 - 00:15:57:09
so that is always a possibility, though
it's not something that's been announced,
00:15:57:09 - 00:16:00:09
but it could make sense
if they look to bring this in.
00:16:00:19 - 00:16:02:17
And we've also mentioned,
00:16:02:17 - 00:16:05:19
the potential of other changes
around, increase in pension ages.
00:16:06:01 - 00:16:10:02
We've we've already going to see
an increase in minimum pension age anyway.
00:16:10:02 - 00:16:11:22
And this is not a result
for change in government.
00:16:11:22 - 00:16:15:10
This has been coming for years down
the line that the minimum access age for
00:16:15:10 - 00:16:18:14
pensions is going to be increasing
ten years behind the state pension age.
00:16:18:14 - 00:16:21:01
So by the time we're in 2028,
00:16:21:01 - 00:16:24:14
that the minimum access age
will be 57 for people's private pensions.
00:16:24:22 - 00:16:28:14
So again, just as part of people
keeping on top of pensions and how that
00:16:28:16 - 00:16:31:23
they're going to be impacted by changes
overall, it's
00:16:31:23 - 00:16:33:03
just something to keep an eye on,
00:16:33:03 - 00:16:36:03
especially if you're planning on retiring
before the age of 60.
00:16:36:03 - 00:16:38:01
Great. Thanks very much, James.
00:16:38:01 - 00:16:42:00
And finally, Rebecca,
if we can come to you that another area
00:16:42:00 - 00:16:45:14
that we know Labour has been looking at to
raise tax revenue is inheritance tax.
00:16:46:04 - 00:16:50:02
And they've previously suggested
changes to business relief.
00:16:50:18 - 00:16:54:01
can you tell us what this would mean
for businesses, particularly those
00:16:54:01 - 00:16:54:20
that a family owned?
00:16:55:21 - 00:16:58:11
Yeah, I think it's probably unlikely
00:16:58:11 - 00:17:01:15
that the government will remove
business relief completely.
00:17:02:11 - 00:17:07:00
If you think about the purpose of business
relief and agricultural relief as well,
00:17:07:12 - 00:17:10:23
it was there to enable family
owned businesses to be passed on
00:17:11:09 - 00:17:13:06
to their beneficiaries without the need
00:17:13:06 - 00:17:16:22
to break up the businesses
in order to fund an IHT liability.
00:17:17:09 - 00:17:21:00
So I think it's quite unlikely
that we'll see it gone completely.
00:17:21:12 - 00:17:24:12
I do think there's a chance
the rules might be tightened up,
00:17:24:14 - 00:17:27:12
maybe changed a little bit so that
00:17:27:12 - 00:17:30:12
the relief just isn't as readily available
as it is now.
00:17:30:23 - 00:17:33:22
So an obvious one for me would probably
00:17:33:22 - 00:17:37:00
be removing the relief on ehm, shares.
00:17:37:08 - 00:17:42:07
So at the moment, ehm shares do qualify
for business relief, and it seems like
00:17:42:07 - 00:17:47:03
an obvious one for the new government
to try and remove relief from, so
00:17:48:06 - 00:17:49:09
that might be something we'll see.
00:17:49:09 - 00:17:52:14
But I do wonder what that might do
to the overall market,
00:17:53:04 - 00:17:57:23
knowing that a lot of people do invest
in that market for the inheritance
00:17:57:23 - 00:18:01:10
tax relief that it provides,
so remains to be seen there.
00:18:01:10 - 00:18:03:16
But as I say, I think it's unlikely
00:18:03:16 - 00:18:06:16
that it'll go completely
for family owned businesses.
00:18:07:10 - 00:18:11:18
I do wonder if we might see a change
to the conditions for business relief.
00:18:11:18 - 00:18:15:11
So at the moment,
the conditions for business relief
00:18:15:20 - 00:18:18:20
are a little bit different
to the conditions when we're looking
00:18:18:20 - 00:18:21:22
at a trading company
for capital gains tax purposes.
00:18:22:06 - 00:18:25:22
So maybe we'll see a bit of an alignment
between those, right?
00:18:26:00 - 00:18:28:01
Between those rules.
00:18:28:01 - 00:18:31:22
maybe making it a little bit more
difficult to qualify for business relief.
00:18:32:04 - 00:18:35:00
So the only people that say,
00:18:35:00 - 00:18:38:17
have the most significant interest
in a business
00:18:39:02 - 00:18:42:20
and a business
that's carrying on maybe 80%
00:18:42:20 - 00:18:47:00
trading activity rather than the 50%
that we have currently.
00:18:47:08 - 00:18:50:04
I think that's something
that we might see going forward.
00:18:51:10 - 00:18:54:11
We've also seen commentary
around the removal of the capital gains
00:18:54:11 - 00:18:58:15
tax uplift on death for assets
who qualify for relief from IHT.
00:18:59:10 - 00:19:01:01
This is something
that was originally suggested
00:19:01:01 - 00:19:04:01
by the Office of Tax Simplification
back in 2019.
00:19:04:15 - 00:19:07:00
Do you think Labour could implement this?
00:19:07:00 - 00:19:10:11
It can be called tax planning
at the moment to hold on to certain assets
00:19:10:11 - 00:19:14:08
until death,
and you benefit from that CGT uplift.
00:19:15:02 - 00:19:18:11
If Labour were to scrap this,
it could potentially result
00:19:18:11 - 00:19:20:15
in a double tax on death, which to see.
00:19:20:15 - 00:19:25:03
But odds with the general principle
that we have that we don't tend to tap
00:19:26:00 - 00:19:28:18
the same asset twice essentially.
00:19:28:18 - 00:19:31:15
but however,
this does give a perceived unfairness
00:19:31:15 - 00:19:34:13
when we're talking about assets
that qualify
00:19:34:13 - 00:19:37:20
for relief, such as business relief
or agricultural relief.
00:19:38:04 - 00:19:43:10
But you so no, IHT is paid,
but you're still getting that CGT uplift.
00:19:43:17 - 00:19:46:21
So I do think it's a possibility
we might lose that uplift
00:19:46:21 - 00:19:50:05
on any assets that qualify for IHT relief.
00:19:50:19 - 00:19:55:13
Maybe the beneficiary will inherit
the original base cost of the asset.
00:19:56:00 - 00:19:59:23
So any gain that sitting on there
is essentially deferred
00:20:00:11 - 00:20:03:14
until later down the line
when the asset sold.
00:20:03:19 - 00:20:08:05
So you're not getting, essentially
two lots of relief reliefs there.
00:20:09:08 - 00:20:12:18
This might mean that we see people
starting to make more lifetime
00:20:12:18 - 00:20:14:19
gifts instead,
00:20:14:19 - 00:20:17:16
but we might also see an overhaul
of the lifetime gifting
00:20:17:16 - 00:20:20:16
regime in conjunction with this.
00:20:20:22 - 00:20:24:04
So currently
you can gift unlimited amounts
00:20:24:04 - 00:20:27:14
during lifetime provided
you survive seven years.
00:20:28:00 - 00:20:29:16
As long as you survived those seven years.
00:20:29:16 - 00:20:33:07
There were no IHT implications
of making these gifts.
00:20:34:15 - 00:20:37:20
there are some suggestions
and things going around that
00:20:38:03 - 00:20:43:08
potentially we might replace this regime
with a limit on lifetime gifting.
00:20:44:08 - 00:20:49:01
This would then discourage people
to make large lifetime gifts.
00:20:49:18 - 00:20:52:21
would eventually bring more assets
within the scope of
00:20:52:21 - 00:20:56:02
IHT as assets of now
being held until death.
00:20:56:02 - 00:20:57:12
Instead.
00:20:57:12 - 00:20:58:23
Thank you very much, Rebecca,
00:20:58:23 - 00:21:01:16
and thank you to all of the speakers
who have joined me today.
00:21:01:16 - 00:21:02:20
I think to conclude,
00:21:02:20 - 00:21:06:10
we know that the government has to fill
a large debt gap in the UK finances.
00:21:06:22 - 00:21:09:18
We also know some of the steps
that are taken to address this,
00:21:09:18 - 00:21:11:14
and it'll be interesting
to see what further measures
00:21:11:14 - 00:21:14:02
are announced in the Autumn statement
on the 30th of October.
00:21:15:03 - 00:21:17:23
Our next episode in the First 100 days
in office podcast
00:21:17:23 - 00:21:20:23
series will be released on Friday
the 30th of August,
00:21:20:23 - 00:21:23:02
where we will be looking
at the potential changes
00:21:23:02 - 00:21:26:04
which will affect employers
and employees that.
00:21:26:05 - 00:21:28:08
Thank you very much
for listening to today's podcast.
00:21:28:08 - 00:21:29:08
We hope you enjoyed it
00:21:29:08 - 00:21:32:20
and please remember to like, subscribe
and leave a review after listening.
00:21:33:02 - 00:21:33:10
Thank you.