Insights

Normal Pension Minimum Age Changes - Advanced Warning Currently, most people can access their personal pensions at age 55. Some people do this to take the tax-free cash to pay off mortgages and other debts, others start to receive an income as they take a glide path into retirement. From 6th April 2028 this age is increasing to 57 and when you were born will determine whether or not you are affected. If you were born before 6th April 1971……. You won’t be impacted because you’ll already have reached age 57 by 6 April 2028. If you were born between 6th April 1971 and 6th April 1973…….. You’ll have an opportunity window from your 55th birthday to 5 April 2028 to access your pension savings before the Normal Pension Minimum Age increases to 57. If you choose not to take any pension savings during this period, you will need to wait until your 57th birthday. If you were born after 6th April 1973…….. The earliest age you will be able to access your pension benefits is age 57 Whilst 2028 seems a long time away, individuals who may be planning to access their pension plans at age 55 and were born after 6th April 1971 need to be aware of this delay in accessing personal pensions now so that they have time to alter their financial plans appropriately with nothing being a nasty surprise…….. 

Tax Year Changes Entering a new tax year means a change to some of the rates/allowances that we have been used to and some have stayed the same. This quick guide is designed to give you an overview of some of the most common……… Allowances - 2024/25 ISA allowance - £20,000 (no change) JISA allowance - £9,000 (no change) LISA allowance - £4,000 (no change) Capital Gains Tax allowance (individual) - £3,000 (2023/24 was £6,000) Capital Gains Tax allowance (most Trusts)- £1,500 (2023/24 was £3,000) Dividend Tax allowance - £500 (2023/24 was £1,000) Income Tax Rates - 2024/25 Personal Allowance - £12,570 (no change) Basic Rate Tax (20%) - £12,571 - £50,270 (no change) Higher Rate Tax (40%) - £50,271 - £125,140 (no change) Additional Rate Tax (45%) - £125,141 + (no change) Dividend Basic Rate - 8.75% (no change) Higher Rate - 33.75% (no change) Additional Rate - 39.35% (no change) Capital Gains (Individuals) - 2024/25 Capital Gains Tax on everything except property Basic Rate 10% (no change) Higher Rate 20% (no change) Capital Gains Tax on property Basic Rate 18% (no change) Higher Rate 24% (2023/24 was 28%)

Budget 2024 - Our Thoughts The general consensus within the industry is that the budget was a little underwhelming. Thanks to the leaks the day before, even the 2p cut in National Insurance wasn’t a surprise. At the Belmore offices, the two areas that have caused the most discussion were the cut of the higher rate of property capital gains tax and the ‘British ISA’...... Property Capital Gains Tax The reduction from 28% to 24% for the higher rate of property capital gains tax is good news for clients. We are finding an increasing trend of clients selling buy-to-let properties and second homes so this tax cut will be beneficial to those individuals. Most clients are realising that the illiquidity of property (you can’t just sell part of a property) and the running costs of a second property are making it more attractive to sell them and invest the proceeds to help them achieve their financial goals. British ISA It has to be said that this seems to be causing a lot of people to walk around with puzzled looks and scratching their heads. The reasoning behind giving an extra £5,000 ISA allowance for investing in the British economy is understandable. How it works in practice has yet to be confirmed - Will existing ISA portfolios containing exposure to UK investments mean that this element qualifies? How will it be administered? What qualifies as a British investment? - is it a company with headquarters in the UK? What happens if you invest in a British ISA and then want to do a fund switch further down the line? The devil is really going to be in the details of this one. No one seems to know the mechanics of it, or whether the industry in general will widely offer them, given no doubt there will be additional administration burdens of setting them up and running them. As always, we will keep you updated with the rolling out of the ISAs and further articles on this will follow in due course. Economic Forecast Whilst it is just a forecast, the Chancellor did say that inflation should reduce further nearer to the government's target of 2% in the next few months. Normally this will encourage the Bank of England to reduce interest rates gradually. Whilst this is good news for those with mortgages, it may also mean that investors start to see interest rates on savings start to reduce. With this in mind, it may be that some of the fixed-rate cash accounts start to see their rates fall in the not-so-distant future, and shopping around for rates could be advantageous. The anticipated reduction in inflation and interest rates should also further help Bond markets recover from the falls seen in the last couple of years. 

Financial Regrets?? A recent poll carried out by Unity Mutual of 2,000 people said that 51% had financial regrets. In amongst the results…….. 34% of people wished they had learned about finances at a younger age 24% of people wished they had paid more into a pension each month 24% of people wished they had started a pension at a younger age 46% of people wished they had put money into a savings account each month These results support what we find when speaking to potential clients about their existing financial position when often not talking to an adviser means they are missing out on tax breaks or understanding the impact of certain financial decisions. It also shows that for anyone, a discussion around the dinner table with family members can be important - not necessarily to come up with the answers but to start the conversation.

Tax Year End Reminders! With everyone doing the annual scramble to get their tax returns in, here at Belmore we’re beginning to turn our focus to the tax year end (and in the hopes of some warmer and drier weather by then)! As well as the ‘normal’ ISA allowances (£20,000 for 2023/24) we’re also reminding people of the increased pension contribution annual allowance of £60,000 for 23/24. That combined with the changes to the pension lifetime allowance rules is leading to some financial planning which, for a long time, has not been possible for some. A lot of companies also have their company year ends to coincide with the tax year end - meaning that making company pension contributions to utilise this increased pension allowance is also attractive to reduce Corporation Tax. There is much talk (and no doubt it will only increase) about what may or may not be contained within the budget, particularly on the topic of Inheritance Tax which many thought was going to be addressed in the autumn statement but nothing was said. A question we regularly get asked by our clients is about what happens if there’s a change of government, will allowances and rules be changed back? The short answer is we don’t know - any advice and decisions should always be made with the facts of today rather than speculation of what might be! Far be it from us to comment that it’s not unusual for politicians to change their minds……. If you would like any help in planning your finances to utilise allowances either before or after the tax year end then please contact us

Updating the Trust Register. Back in the summer of 2022, we were busy reminding and helping clients to complete any online Trust registrations that were needed. On 1st September 2022, a deadline passed which meant that all Trusts had to be registered with HMRC regardless of whether tax returns had to be completed annually. At the time, all Trustees were busy trying to navigate the process and could either do it on their own or have assistance in doing this. Everyone got their heads around the process and the data that was required to complete the registrations. Fast forward 18 months Any new Trusts being set up are needing to be registered which is now a normal part of the process. However, we are finding that clients are coming ‘unstuck’ when it comes to “maintaining” the registration. Updates may be needed because Trustees change, beneficiaries or Trustees have died, or the Trust wishes to make new investments and require a Trust Registration Certificate Who is responsible? A lot of Trustees don’t realise that it is their responsibility to keep the register up to date with any changes. We are finding that these updates are beginning to fall between the cracks as Trustees are wrongly assuming that a third party (either ourselves or a solicitor) can do this for them. Due to the way it is set up, it is the lead Trustee who has the login details for HMRC and who are able to make the necessary changes. At Belmore, we have seen first-hand what the pages look like once Trustees are logged in and we think it is fair to say that it could be simpler! What can we do to help? We are restricted in the help we can give to Trustees as we cannot do this for them, however, the team have written little guides for ‘how to’ do things on the site as we are coming across them …….. If you would like any of these guides then please get in touch.

Abolition of the Lifetime allowance. As expected following the last budget, in the Autumn statement the government confirmed it will introduce legislation to abolish the Lifetime Allowance with effect from 6 April 2024. The legislation will aim to clarify the taxation of lump sums and lump sum death benefits. It will also detail the application of lifetime allowance protections and the tax treatment for overseas pensions. The legislation should also provide clarity concerning transitional arrangements and reporting requirements for pension schemes. What more do we now know? We have said for a while that with the pension changes, the devil was in the details and away from the headlines, HMRC quietly updated the original abolition of the lifetime allowance policy paper it first published on 18 July. This clarified several of the potential issues the industry had identified in the initial proposals and we expect to see this reflected in the legislation. The key changes to the policy document are: • The updated policy paper confirms that beneficiary drawdown and annuity payments will continue to be paid free of income tax when the member dies under the age of 75. • Payments made under the trivial commutation, small pots and winding up lump sum rules will not be included in the new limits for tax-free cash payments and tax-free lump sum death benefit payments. • It would seem there may be an opportunity for some who have previously taken benefits without taking their tax-free cash entitlement to claim tax-free cash on their remaining funds where previously they couldn’t because they would be restricted by the lifetime allowance. What is replacing the Lifetime Allowance? As a reminder, the plan is to replace the lifetime allowance with two limits – a lump sum allowance to limit tax-free cash payments and a lump sum and death benefit allowance to limit the total of tax-free payments both in lifetime and on death. In a change to the previous rules, only lump sum payments will be tested whereas income payments can be made without restriction (but subject to income tax). Other Pension-Related Items It would seem that the reality of workplace pensions is beginning to filter through as there is potential for employees to end up with multiple small pots as they move employment and these can become difficult to keep track of. To tackle the problem, the Chancellor announced plans to create a ‘pot for life’ which aims to allow workers the option to have one pension plan and would require employers to pay contributions to it, rather than joining new workplace schemes each time they moved jobs. The government will also consult on plans to allow a small number of authorised schemes to act as a consolidator for pension pots under £1,000. Whilst this is a positive move in terms of the employee, it does raise questions of how an employer would administer this easily as in theory, it could lead to a Direct Debit payment per employee into different schemes. National Insurance and salary sacrifice In the autumn statement, there was also an announcement which reduced employee National Insurance by 2% from 6th January 2024. Whilst not directly related to pensions the 2% reduction in the employee national insurance could see some sacrifice arrangements changing if they had been set up to keep the take-home pay the same. Despite this, salary sacrifice still generally remains the most attractive way of making contributions where the option is available.

With the Autumn Statement having taken place today, there are headlines about the announcements the Chancellor has made. However, out of the headlines (so far!) is the specific information some of our clients were waiting for about the changes in pension legislation. However, while we are waiting for these to filter through, a recap on the headlines so far that we believe will affect our clients the most are……. National Insurance: Employee rate cut from 12% to 10% from January 2024 Class 2 contributions (relevant to self-employed) are to be abolished Class 4 contributions (relevant to self-employed) are to be cut from 9% to 8% from April 2024 Pensions: The triple lock was honoured with State Pensions to increase by 8.5% from April 2024 (Full State Pension will be £221.20 pw) Work is to begin to allow employees to have one pension pot that they can nominate an employer to pay contributions into What was ‘missing’: There was considerable speculation in the media just prior to the statement about the chancellor changing Inheritance Tax rules. So far, we have not seen any changes being reported in the headlines and tax thresholds remain unchanged too The Economy in General: Between the chancellor and the OBR, there isn’t too much change in the forecasting for the UK economy, the short-term seems to be slightly brighter whilst the longer-term figures aren’t quite as high as was previously predicted. The positive seems to be that short term, there is now a predicted positive figure rather than a negative one. In terms of inflation, it is anticipated that it won’t return to the 2% target until 2025. As more details emerge in the next few days we will be releasing more blogs updating the information as we are able

Next week sees an important date in the financial calendar of the Autumn Statement. This should give some clarification on some of the big issues surrounding the new pension legislation that was announced in March 2023 along with some of the more normal announcements such as the tax rates that will be effective for 2024/25 and decisions on the increases to State Pensions amongst other things. As mentioned in our blog when the pension changes were first announced, there are still some questions yet to be answered. There are a few key unanswered questions that have the potential to affect our clients and the planning we do for them which are waiting to be answered. Amongst them, the question about what is happening to the tax status of beneficiary drawdown pensions where the pension owner died before age 75. At the moment the income is paid to the beneficiary tax free, but whilst we know this is changing going forward in 2024/25 there has been no confirmation about legacy cases - it would seem somewhat cruel if they were suddenly taxed on the income being received if the legislation were to be taken back retrospectively. There are also unanswered questions about small pots, stand-alone lump sums, and details around how/if existing lifetime allowance protections will impact tax-free cash limits. Further guidance on all these areas is needed in order for appropriate advice to be given to clients.