PROSPERITY
PRIVATE CLIENT NEWSLETTER
WELCOME
Welcome to the latest edition of Prosperity.
The last few months have seen a period of great change, with the election of the first Labour government for 14 years followed by Donald Trump’s return to power in the US.
We have also seen Rachel Reeves, Chancellor of the Exchequer, deliver her first Budget, with far reaching effects for individuals and businesses. In this newsletter we break down some of the key measures announced, how they may affect you and the steps you can consider taking to reduce the impact.
We consider the changes proposed for retirement planning, as the Chancellor announced pensions will be included within estates and, therefore, liable for Inheritance Tax from April 2027. We also discuss ideas for how you can protect yourself and your family from a significant tax liability on death, with whole of life cover becoming an increasingly important tool as a tax planning strategy.
We hope you find this newsletter provides useful content to help manage your finances more effectively. Please do feel free to contact us if you have any questions relating to tax or financial planning.
As always, we are here to support you, providing bespoke advice tailored to your needs.
Reme Holland Financial Planning Partner
STAYING INVESTED
Political parties come, and they go. Taxes go up, and occasionally down. Markets go up, and often down too, and we don’t have a lot of control over any of them.
We do however have control over the way we invest our clients’ funds.
Almost 10 years ago, our team launched the Albert Goodman investment portfolios, and we applied our principles of using low cost, evidence based investments. This means investing only in ways that have been shown over time to enhance returns, and controlling only the things you can control; like cost and asset allocation, then leaving markets to themselves.
Over that period we have had six Prime Ministers, three US Presidents, equities have had 48 negative months and 69 positive months1, but our portfolios have rolled along nicely, contributing to our clients’ wealth.
Let’s compare what would have happened if you’d taken our advice nine years ago, and invested £10,000:
If you’d remained in a Cash2 account for the duration, it’d now be worth £11,305
If it kept pace with inflation3 it would now be worth £13,403
If you’d invested in an Active Managed Balanced Portfolio4, it’s now worth £14,375
Invested in the AG Balanced fund5, would now be worth £17,506!
What’s the lesson? Stay in the market, apply core principles of keeping costs low and maximising returns for your risk profile and you’ll get your reward. Play the long game; there’s no need to check every day, week or even month (remember the 48 negative months?), stay put, and get your returns.
Notes: Returns are not guaranteed, past performance is not an indicator of the future, and you should seek advice before investing. Data Source: FE Analytics. Data points on AG portfolio figures are daily, so may appear more volatile than other indices.
1 FTSE All World
2 Interest earning account at Bank of England Base Rate
3 CPI Inflation
4 Asset Risk Consultants Balanced Fund made up of real Active Portfolios, after fund charges but no advice fees.
5 AG Portfolio including assumed 0.3% platform fee, after fund charges, but no advice fees.
CHANGES TO NON-DOMICILED TAXATION
The 2024 Autumn Budget has introduced significant changes to the taxation of non-UK domiciled individuals, commonly known as ‘non-doms.’ These reforms aim to modernise and simplify the tax system, making it fairer and more competitive. Here is a summary of the key changes:
Abolition of the Non-Dom Regime
The most notable change is the abolition of the existing ‘non-dom’ regime. This regime allows individuals who are not domiciled in the UK to benefit from favourable UK tax treatment on their foreign income and gains. With effect from 6 April 2025, the concept of domicile will no longer be relevant from a UK tax perspective.
Introduction of a Residence-Based System
In place of the current domicile-based system, a new residence-based regime will be introduced. This system will determine UK tax liabilities based on an individual’s tax residency status rather than their domicile status. Key features of this new regime include:
Four-Year Foreign Income and Gains (FIG) Regime:
New arrivals who have not been UK tax resident in the previous ten years will be subject to a four-year regime for foreign income and gains.
Temporary Repatriation Facility (TRF): Individuals previously taxed on the remittance basis can remit pre6 April 2025 foreign income and gains using this new facility.
Reform of Overseas Workday Relief (OWR): Changes will be made to Overseas Workday Relief, which previously allowed non-doms to exclude income attributable to overseas workdays from UK tax.
Inheritance Tax Changes
The inheritance tax system will also see a shift from a domicile-based regime to a residence-based system. This means that inheritance tax liabilities will be determined by an individual’s residence status rather than by their domicile.
Currently, UK-domiciled individuals are subject to UK IHT on their worldwide assets. Non-UK domiciled individuals are currently only subject to UK IHT on any UK situs assets.
Impact on Non-Doms
These changes are expected to have a significant impact on non-doms who have traditionally benefited from the favourable tax treatments available under the current regime. The new residency-based system aims to create a level playing field, ensuring that all UK residents are taxed in a more equitable way.
Government Rationale
The government has stated that these reforms are part of a broader effort to modernise the UK tax system, making it simpler and fairer. By moving to a residence-based system, the government aims to reduce complexity and improve compliance.
Conclusion
The 2024 Autumn Budget marks a significant shift in the taxation of non-domiciled individuals in the UK. With the abolition of the concept of domicile and the introduction of a residence-based system, the government aims to create a fairer and more competitive tax environment. These changes, however, will undoubtedly have farreaching implications for non-doms and their tax planning strategies.
If you have any questions or need further details on how these changes might affect you, please do get in touch with our expert team.
CGT UPDATE
Capital gains tax (CGT) is the tax due on the increase in value of an asset on the disposal of that asset. Most commonly this is on the sale of an asset, however gifting an asset to another person, company or trust would also constitute a disposal for CGT purposes.
CGT is due on the gain made on an asset. The gain is calculated by deducting the base cost from the proceeds or market value of the asset at the date of the disposal. Individuals have an annual exempt amount of £3,000 which can be deducted from the gain to reduce the amount liable to CGT.
The rate at which CGT is payable depends on the asset being disposed, the income levels of the individual making the disposal and, following the recent Labour budget, the date of the disposal. Depending on the amount of basic rate band available after calculating the individual’s income tax liability, part of the gain will be taxed at a lower rate and any remaining gain thereafter will be taxed at a higher rate.
The CGT rates for the current tax year (2024/25) prior to the budget on 30 October 2024 and following the budget are summarised in the table below:
As the table shows, it was announced in the recent Labour budget that the standard lower and higher rates of CGT have been increased to align with the residential property rates. This means the disposal of assets such as shares or land are now taxable at these increased rates. It is also worth noting that the CGT rate for carried interest is increasing from April 2025. This was previously taxed in line with the residential property rates but will increase to 32%.
Another announcement to come from the Labour budget was that the rate of CGT where business asset disposal relief (BADR) is being claimed will increase. BADR is available where there has been a material disposal of a business asset, such as shares in a personal trading company. Historically, where BADR has been claimed, the whole gain would be taxed at the lower rate of 10% up to the utilisation of the lifetime limit of £1million. From 6 April 2025, the rate of BADR will increase to 14%, with a further increase to 18% from 6 April 2026.
The CGT rates for residential property have not changed following the budget, however there have been updates to the stamp duty land tax (SDLT) rules. The 3% SDLT surcharge for owners of multiple residential properties has increased to 5% with effect from 31 October 2024.
The point at which buyers of residential properties start paying SDLT is also changing. Previously the first £250k of a residential property was not liable to SDLT and between £250k and £925k SDLT is due at a rate of 5%.
A new band will come into force from 1 April 2025 whereby SDLT will be due at a rate of 2% between £125k to £250k.
These recent changes may have an impact on how people choose to invest in their assets going forwards. If you would like to discuss how the recent changes could impact you, please get in touch with your usual point of contact.
Kathryn Loader Tax Manager
ALL CHANGE FOR CAPITAL TAXES ON BUSINESS
The Autumn Budget of 2024 has made some significant changes to the way capital taxes impact business assets. In this article we will look at the main changes and the impact on tax planning for businesses going forward.
Capital gains tax
The changes to capital gains tax (CGT) will have a significant effect on the amount of CGT payable on the disposal of business assets. (Please note that furnished holiday let businesses are treated differently and are not included in the comments below)
Increased in CGT rates generally
Changes to business asset disposal relief (BADR)
The main rates of CGT have risen from 10%/20% to 18%/24% with effect from Budget day on 30 October 2024. The lower rate in each case applies for so much of the gain as falls within your basic rate band and the remainder of the gain is taxed at the higher rate. This brings the general rate of CGT in line with residential property gains, which have not changed.
Whilst this is not as high as some commentators were predicting, its immediate application makes no room to manoeuvre so that, unless you had exchanged unconditional contracts before Budget Day, the new rates will now apply.
Business asset disposal relief can provide for a lower rate of tax for the time being and leaves some scope to plan. The existing 10% on the first £1 million of gains from the disposal of a business remains until 5 April 2025 when the rate rises to 14%. The rates will then rise to 18% on 6 April 2026. Whilst this final rate represents a small discount compared with the top rate of 24%, it is now much less generous.
This means that if you are looking to sell your business it may be beneficial to do so sooner rather than later. Trying to sell a business in a few months may be unrealistic but if you can get to the point of an exchange of unconditional contacts that will fix a tax point.
Inheritance tax
The inheritance tax (IHT) payable on business assets will also change with effect from 6 April 2026, so we have a little time to make adjustments where possible.
At the moment, interests in trading business are effectively exempt for IHT by way of business and agricultural property relief at 100%, so a business can be passed from one generation to the next without an IHT impact.
Relief for business and agricultural property will be restricted from 2026. Thereafter the first £1 million will continue to attract 100% relief as at present but thereafter the relief is limited to 50%. For example, a business worth £5 million will attract business relief of £3 million leaving £2 million in charge to tax. This will have significant impact for any business which is based around property as these limits are easily reached if the business uses land and buildings. The farming community will be particularly hit but so will hotels and factories, for example, which typically have a significant asset base.
Historically, business and agricultural assets were generally best passed on through the business owners’ Will on death. This change in relief will push people to consider moving assets during lifetime, where the transfer can be tax free provided the giver survives at least seven years from the date of gift. Making lifetime gifts of business assets can also be CGT free by making an election to holdover the gain, but this means that the successor acquires the property at the givers’ base cost and not market value, as currently applies on death inheritances. Particular care is needed to ensure any lifetime gift is not subject to the gift with reservation rules.
Summary
Whilst there is no need to act in haste, now is a good time to consider the future of your business and how to plan for succession or onward sale.
The Budget measures have not passed into legislation at the time of writing and therefore these provisions may yet be subject to change.
Andrew Law Tax Director
LANDLORDS - HOW WILL MTD ITSA AFFECT YOU?
Many landlords will be forgiven for not knowing much about Making Tax Digital for Income Tax and Self-Assessment (MTD ITSA).
However, the most recent change announced in the Budget will bring a significant number of unaware and unrepresented landlords into the MTD regime. Many will also be blissfully unaware of the drastic change to the way they must report their property income in the future.
The below article helps to explain what MTD ITSA is, how it might affect a landlord and how to get ready.
WHAT IS MTD ITSA?
MTD ITSA is the second wave of HMRC’s Making Tax Digital transformation.
It is essentially a requirement to keep and submit digital records to HMRC on a quarterly basis and will replace the current annual self-assessment tax regime for those affected.
WHO WILL BE AFFECTED AND WHEN?
The regime will be rolled out in 3 stages, starting in April 2026.
From 6 April 2026 – Landlords and sole trade businesses with qualifying income over £50,000 will be required to register and comply with MTD ITSA.
From 6 April 2027 – Landlords and sole trade businesses with qualifying income over £30,000 will be required to register and comply with MTD ITSA.
Expected To Be After 6 April 2027 – Landlords and sole trade businesses with qualifying income over £20,000 will be required to register and comply with MTD ITSA.
It is important to note that qualifying income is based on the combined income from these sources and not profits or income in isolation. Therefore, a landlord with a wholly owned single property earning £1,667 per month in rent will eventually be brought into the regime.
Partnerships will be required to join at a later date which has yet to be announced.
WHAT WILL NEED TO BE FILED?
Those affected will need to:
1. Keep and submit digital records of their business income and expenditure.
2. Send quarterly reports to HMRC for each property business (i.e. a taxpayer with a UK property and a foreign property will need to send 8 quarterly reports, 4 for each property business)
3. Send a final declaration to HMRC.
KEEPING DIGITAL RECORDS
The current process requires a landlord to keep adequate records, not digital records.
Currently these records must evidence their property income (e.g. rent receivable) and property expenditure (e.g. repairs and maintenance) and can be in a format that suits the taxpayer (e.g. pen and paper plus receipts).
Once a landlord signs up or is required to sign up to MTD ITSA, they will need to keep digital records. These must be compatible with MTD ITSA.
There are a couple of methods for doing this. The first uses spreadsheets and bridging software and the second, uses MTD compliant software that is directly linked to HMRC’s platform via API’s.
Whilst both require the retention of receipts, the second option is generally considered superior, but there are pros and cons to both.
SENDING QUARTERLY REPORTS
Much like a quarterly VAT return, landlords will be required to send a quarterly property income report to HMRC.
This report will include the income and expenditure for each property business and the deadlines for filing will be the same for every taxpayer within the regime. The deadlines will be:
7 August
7 November
7 February
7 May
The aim here is for limited manual intervention and for the figures kept digitally to be sent directly to HMRC via an API.
Therefore, keeping records on MTD compliant software will make this process much simpler as bridging software is not needed. This will save time and also provide real time information which is invaluable when making longer term decisions.
SENDING A FINAL DECLARATION
The final declaration is a chance to make adjustments, add income, gains and claim reliefs. It will effectively replace the existing self-assessment tax return.
The deadline for filing the final declaration will be the 31st January following the end of the tax year (aka the same as the existing self-assessment tax return).
WHAT STEPS SHOULD YOU TAKE NOW TO PREPARE?
Talk to an advisor who understands the MTD ITSA regime - Advisors with MTD experience will be able to help steer you through the process and save you a huge amount of time and stress.
Assess your qualifying income levels - Are you someone that will be affected?
Hold a dedicated business bank account for each business or property - This will make the whole MTD process of keeping digital records much simpler.
Start keeping records digitally - Starting early will give you time to refine your processes.
Get into the habit of completing your bookkeeping on a regular basis - Quarterly updates will mean that you need to file more regularly.
Research the benefits of online software - Whilst there is usually a small cost attached (not always), cloud based online software can have huge benefits that many will think worth the money.
If you think you might be affected or are interested, please don’t hesitate to get in contact as we are happy to help.
David Lake Tax Manager
PROTECT YOURSELF AGAINST IHT
The changes announced in the recent Budget have brought significant implications for inheritance tax (IHT) planning. As individuals and families seek to safeguard their estates and ensure that their wealth is transferred efficiently to their heirs, the use of whole of life cover, a staple of IHT planning, has emerged as a pivotal strategy.
Whole of life cover is a type of life insurance policy that provides coverage for the entirety of the policyholder’s life, as long as premiums are paid. Unlike term life insurance, which only covers the insured for a specified period, whole of life cover guarantees a payout upon the policyholder’s death, regardless of when it occurs. This characteristic makes it particularly advantageous for addressing longterm financial obligations, such as inheritance tax liabilities.
Benefits of Whole of Life Cover for Inheritance Tax Liability
Certainty of Payout
One of the most significant benefits of whole of life cover is the certainty of a payout. Since the policy is designed to last for the policyholder’s lifetime, it ensures there will be a guaranteed sum available to cover the inheritance tax liability upon death. This provides peace of mind to the policyholder and their heirs, knowing the necessary funds will be available to settle the tax bill without having to liquidate assets or compromise the estate.
Fixed Premiums
Whole of life policies often come with fixed premiums, which means the cost of the policy remains constant throughout the policyholder’s life. This fixed cost can be advantageous for financial planning, as it allows individuals to budget effectively and avoid the uncertainties of fluctuating premiums. The stability of fixed premiums also ensures the policy remains affordable over the long term, making it easier to maintain coverage.
For a couple, both aged 65 and non-smoking, with a sum assured of £200k that is paid out on the second death, the premiums are approximately £290 per month.
Tax Efficiency
Premiums paid for whole of life cover can be structured in a tax-efficient manner. When the policy is written in trust, the proceeds from the policy do not form part of the deceased’s estate, thereby avoiding inheritance tax on the payout itself. This means that the full amount of the policy can be used to cover the IHT liability, maximising the benefit to the heirs and preserving the estate’s value. For a couple, they could elect to have a 2nd death policy, this allows for assets to be transferred to each other (if they are married or in a civil partnership) utilise the spousal exemption and then have the payout on 2nd death within the couple.
Flexibility
Whole of life policies offer a degree of flexibility that can be beneficial when planning for inheritance tax. Policyholders can choose between different levels of cover and premium structures to suit their financial situation and estate planning goals. Additionally, many policies allow for adjustments to the sum assured and premium payments over time, accommodating changes in the policyholder’s circumstances or tax planning needs.
What are the pros and cons for this strategy?
Pros
Guaranteed Payout: Ensures there will be funds available to cover the IHT liability, providing financial security to heirs.
Fixed Premiums: Offers predictability in financial planning with premiums that remain constant over the policyholder’s lifetime.
Tax Efficiency: When written in trust, the policy proceeds are not subject to IHT, preserving the estate’s value.
Flexibility: Allows policyholders to tailor the coverage to their specific needs and adjust it as circumstances change.
Cons
Cost: Whole of life cover can be more expensive than term life insurance, especially for older individuals or those in poor health.
Commitment: Requires a long-term commitment to paying premiums, which may become burdensome if the policyholder’s financial situation changes.
Complexity: Understanding the different options and structuring the policy to achieve tax efficiency can be complex and may require professional advice.
Inflation Impact: The fixed sum assured may not keep pace with inflation, potentially reducing the real value of the payout over time.
In light of the recent changes announced in the Budget, using whole of life cover to insure an inheritance tax liability presents a compelling option for many individuals.
The certainty of a payout, fixed premiums, and tax efficiency make it a valuable tool in estate planning. However, it is essential to weigh the costs, commitment, and potential complexities involved. Speak with us here at Albert Goodman, we can offer advice around the suitability
of this strategy as well as ensuring you have the right sum assured for your needs.
Having a whole of life plan in conjunction with other strategies can help make sure you pass as much of your estate on to your loved ones as you can.
The above is for information only and does not constitute advice. Levels, bases and taxation may be subject to change. The Financial Conduct Authority does not regulate estate planning, tax advice or trusts.
Reme Holland Financial Planning Partner
INHERITED PENSIONS
The recent Budget included an announcement that from 6th April 2027, when a pension scheme member dies with unused funds or without having accessed all of their pension entitlements, it will be treated as being part of that person’s estate and may be liable to Inheritance Tax. The current distinction in treatment between discretionary and non-discretionary schemes will be removed.
The change will apply to both Defined Contribution/Money
Purchase Pension pots, Lump Sums from Defined Benefit Pension schemes and Group Death in Service Schemes. It will apply equally to UK registered schemes and unapproved non-UK pension scheme (QNUPS). This will mean that the benefits from most pension benefits and Group Death in Service benefits (for deaths from 6th April 2027 onwards) will be subject to Inheritance Tax unless exempt though an “inter- spouse exemption”.
A small number of specified pension benefits will still remain outside the scope for Inheritance Tax, including where funds can only be used to provide a dependants’ scheme pension.
Pension scheme administrators will become liable for reporting and paying any Inheritance Tax due on pensions to HMRC. This will require pension scheme administrators and personal representatives to share information with one another - a technical consultation has been issued on the processes required to implement these changes for UK-registered pension schemes. After the consultation, the government will publish a response document and carry out a technical consultation on draft legislation for these changes in 2025, so it’s possible the final rules may change.
Pension Schemes are, however, still one of the most tax efficient means of saving for retirement. The government continues to incentivise pension savings for their intended
purpose of funding retirement, supported by ongoing tax reliefs on both contributions into pensions and on the growth of funds held within a pension scheme.
For death before 6 April 2027, it’s important to be aware that most pension schemes aren’t subject to Inheritance Tax and therefore it’s still VERY important to consider whom you wish to receive your pension pot on your death.
Beneficiaries (i.e. those you want to pass your money onto) may be able to receive tax-free withdrawals if you die before the age of 75 – but there are restrictions on the amount that can be paid out tax-free as a lump sum.
It’s important to bear in mind that any money taken out of a pension pot during your lifetime, even on deaths before 6th April 2027, could still form part of someone’s estate if not spent at the time of death and the total value of the estate exceeds the amount of Nil Rate Band and Residential Nil Rate Band that can be claimed by the Estate.
Money left in your pension pots can be passed on to your dependents or family potentially tax-efficiently, depending on:
the type of pension plan and the features and benefits it offers - not all pension plans offer full flexi-access drawdown for beneficiaries which may result in all the money being paid out to a beneficiary as a lump sum.
who is “named” on your “Expression of Wish” to benefit from you pension – note your Will won’t do this for you.
your age at death - if death occurs after age 75, the beneficiaries will have to pay income tax at their highest marginal rate on any withdrawals taken by them from your pension pot.
Can I choose who inherits my pension savings?
You can provide the Pension Scheme Trustees with details of who you would prefer the funds to be passed on to by completing an Expression of Wish form, but the Pension Scheme Trustees will still have “discretion” over who to pay the pension benefits to in order for the pension not to be subject to IHT. However, the Trustees will usually take into account your wishes when deciding who to pay your pension savings to but may not be bound by your wishes.
You can also ask for the money to be paid to a family trust or to a registered charity (via a ‘charity lump sum death benefit’), a sum of money paid to a registered charity on death, that will also be tax-free.
There are some rules around this though, for example the charity must be nominated by you (rather than by your executor) and you can’t have any dependents at the time of payment. For the purposes of this rule, a dependent is a spouse, civil partner, a child under the age of 23, disabled child of any age and some co-habiting partners.
It’s really important to get advice on this matter and to check that your beneficiary arrangements are up-to-date, especially if you have multiple pension plans and/or complex family circumstances.
Whilst you can transfer your pensions into one plan (to help make it simpler to manage and ensure all your arrangements are accurate), however transferring pensions isn’t right for everyone.
Claire Musson Director of Financial Planning claire.musson@albertgoodman.co.uk
BASE RATE REDUCED – WHAT DOES IT MEAN FOR MY MORTGAGE?
The Bank of England’s Monetary Policy Committee (MPC) recently announced it has cut the base rate by 25 basis points, from 5% to 4.75%.
This move was anticipated by the financial markets, due to a continued fall in inflation in recent months. Although news of a reduction in the cost of borrowing is to be welcomed, it has yet to be reflected in immediate changes to mortgage rates.
This is largely due to Rachel Reeves’ recent Budget announcement, which led to an increase in swap rates, the inter-bank lending rate which is based on future interest rate expectations. Swap rates influence the pricing of fixedrate mortgages. When these rates rise it often results in mortgage rates going up, and vice versa when they fall.
Lorraine Balcombe, Mortgage Consultant at Albert Goodman Financial Planning, commented on the announcement:
“News of the base rate reduction will be welcomed by those on tracker or variable rate mortgage products, with monthly mortgage payments being reduced. With the base rate now at its lowest level since June 2023, it is also good news for those coming towards the end of their fixed rate mortgage term.
Mortgage rates have been falling in recent months, with the best deals now below the rates available before the ill-fated mini-Budget in September 2022 when Liz Truss was Prime Minister.
We do expect to see mortgage rates reduce in the coming months and throughout 2025. However, it is now likely the base rate will remain higher for longer due to the impact of the Budget, which included an increase in government borrowing and a rise in employer national insurance contributions, which are both predicted to feed into an increase in inflation.
Some lenders have marginally increased their mortgage rates in response to the anticipated rise in inflation, although we believe this is a short-term reaction. On 29 October, prior to the Budget, the five-year swap rate stood at 3.87%. Immediately after the Budget five-year swap rates increased to 4.08% and have now fallen back slightly to 4.06% as a result of the base rate reduction.
Homeowners should consider that current fixed mortgage rates have already factored in some expected cuts to interest rates throughout next year, likely to benefit the 1.8 million homeowners who are on fixed mortgage deals which expire during 2025. However, rates may not fall as far or as fast as they were anticipated to prior to the Budget.”
HOW HAS THE BUDGET IMPACTED MORTGAGES?
As a result of the Budget, analysts have reacted by revising down their expectations for interest rates cuts in the medium term. The Office for Budget Responsibility reported Labour’s policies would raise the average level of inflation by 0.6 percentage points during 2025, with inflation falling to the Bank of England’s 2 per cent target in 2029.
Andrew Bailey, the Governor of the Bank of England, said the following in his press conference immediately after news of the rate cut announcement:
“We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much. But if the economy evolves as we expect, it’s likely interest rates will continue to fall gradually from here.”
A leading US investment bank adjusted its forecast regarding the Bank of England’s interest rates. Prior to Rachel Reeves’ Budget, Goldman Sachs predicted interest rates would fall to 2.75% by November 2025, in anticipation of a more aggressive rate-cutting strategy from the MPC. Following the Budget, Goldman Sachs now predict the bank rate to fall to 3% by next November, with inflation expected to rise moderately due to increased demand linked to GDP growth.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Lorraine Balcombe Mortgage and Insurance Consultant
NEWS ROUND UP FOR TRUSTEES AND EXECUTORS
Income tax reporting for trustees
The UK government has implemented reforms to simplify the taxation of low-income trusts, easing the burden on trustees. From 6th April 2024, trusts with income of all types up to £500 will not pay Income Tax on that income as it arises. Where income exceeds that amount, tax will be payable on the full amount. This helps trustees of smaller trusts to avoid excessive paperwork.
From 6th April 2024, the basic rate and dividend ordinary rate of tax that applies to the first £1,000 slice of discretionary trust income has been removed so that all income is taxed at either 39.35% or 45% (with relief for trustee expenses remaining unchanged).
Income tax reporting for Estates in administration
From the 6th April 2024, the income tax reporting by executors and personal representatives during the period of administration has been changed.
Executors or personal representatives administering the estate of someone who has died, have an obligation to account to HMRC for any income tax or capital gains tax arising on their income and gains. Depending on the size of the estate, there is an informal route whereby executors can report by letter to HMRC at the end of the administration period all income and gains during the period or alternatively they need to submit an income tax return.
If all types of income received in a tax year from 24/25 is less than £500, then this income no longer needs to be reported to HMRC and the executors do not need to pay any income tax. Previously this was limited to bank and building society interest and estates received small dividend payments were still obliged to report that income.
If the estate receives more than £500 of income in any one year, then all of the income for that year is reportable and all of the income is taxed.
Trust Register System (TRS)
Those who are familiar with trusts and estates will not be a stranger to HMRC’s Trust Registration Service which was introduced in 2017. Most trusts are required to register but there are still a few exceptions.
If a trust that is supposed to be registered is not, the trustees may get hit with a £5,000 penalty however we are yet to see these actioned! If your trust is not registered, then
this should be done sooner rather than later.
Trustees are the ones responsible for having the trust registered on the TRS if it is required. They will need to share some basic information like the trust’s name and when it was created, plus information like names, addresses, and NI numbers of all the beneficiaries and trustees, along with a rundown of the assets and their value. And do not forget— if there are any changes to the trust such as a change in trustee, new addresses etc then the trustees must update the TRS within 90 days so the most up to date information is reported on the annual declaration. We are happy to help if you have any questions.
Tailored Changes to IHT100 Forms for 2024
There have been some changes to the IHT100 forms which trustees need to submit to report various chargeable events, for example the ten-year charge, death of a life tenant etc.
Previously, an IHT100 was completed alongside an event form accompanied by additional back up schedules. The IHT100 and event form have been amalgamated into one. Following changes during the covid season, these IHT forms still do not require signatures so long as all the trustees have approved them.
HMRC will continue to accept the old forms until the end of December 2024 but thereafter the new versions must be used.
Ruth Powell Tax Director