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Autumn Budget preview with Leodis Wealth

Leodis Wealth

Phil Organ, associate director at Leodis Wealth, shares his views on the upcoming Budget:

The Chancellor, Phil Hammond was in a hole trying to balance the books in line with the extra £20bn promised to the NHS, and Prime minister, Theresa May’s conference speech declaring the end of austerity.

Speculation went into overdrive about where the money was coming from. Then he was handed a lifeline of c£13bn by the government borrowing figures for September which were materially better than forecast. He also still needs to target a mix of savings and tax increases. These are more likely to be achieved by adjustments to the tax bands and delays on the planned increases in personal allowances, than the three areas of inheritance tax, capital gains tax and pensions, and would have a more material impact on the figures.

When it comes to inheritance tax, I do not expect any changes. The RNRB (Residential Nil Rate band) is still being phased in to bring the overall potential inheritance tax exemption up to £1m for couples with a home in their Estate by tax year 2020/21. This isn’t a major revenue producer so it’s not in the crosshairs.

At some stage the capital gains tax rate could be realigned once again with income tax rates, but again this is unlikely in this budget. We’re more likely to see further tightening in the reliefs provided through VCT/EIS investments.

However, as Brexit looks large, we trust the Chancellor will be reluctant to do much to disincentivise the Enterprise Economy with growth in the UK economy, a pre-requisite of post-Brexit success.

Pensions are an easy target and there are anomalies to be addressed which may prove more palatable to iron out to the wider population (although risks splitting the Conservative Party traditional support).

Tax credits on contributions at the higher rate of income tax will surely go at some stage, but the government borrowing windfall may prove a stay of execution to a move that would be difficult for a minority government split down the middle on Brexit.

Reducing the annual maximum allowance from £40,000 to perhaps £30,000 looks more likely. It may fly in the face of the need to encourage more people to save for their retirement, but you sense that something has to give in the budget.