There is one word that can sum up what we have just endured and what we are likely to face moving forward, and that is CHANGE. I can imagine however that other descriptive words spring more readily to mind!
Being business owners we are resolute and adept at managing change. One of the biggest challenges for successful businesses is how we extract income and profit in the most tax efficient way. It feels however, that we are being squeezed in many ways.
I’m up here at Celtic Manor for a conference and have just heard the ex-pensions minister Steve Webb, and Bob Gordon, the pensions consultancy manager from Standard Life talk about the landscape for pensions. The message is pretty clear; make the most of pensions and the tax relief whilst you can. What a great way of extracting profits from your business.
Sure, the allowances for contributions for pensions have been slashed to £40,000 per year but the opportunities for tax relief on future contributions are likely to diminish yet further and we at Blue Sky, would encourage you to make the most of your annual allowances whilst you can. If you haven’t carried forward unused allowances from previous years do so whilst you have the chance.
At the last budget, the tax relief on pensions was given a ‘stay of execution’ but don’t be surprised if the various levels of tax relief are equalised with higher rate taxpayers experiencing a reduction to a standard level of tax. It may also be the case that unused relief from previous years is restricted.
Let’s face it, the Treasury is always looking at ways to save money and reclaim tax. It may therefore be the case that the annual allowance is reduced from £40,000 down to as low as £20,000 over time. Interestingly, this is the same as the proposed annual allowance for a NISA from April 2017.
We have a new regime in Government but they are similar to what’s gone on before in that they have to balance the books. We have stated previously that the newfound freedoms in pensions are to be welcomed but expect severe restrictions from now on in terms of tax relief and contributions. Beware of the forthcoming budget in November! Expect a likely U- turn on fiscal policy, with a harder stance than anticipated under George Osborne.