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Pre Budget Report

Pre Budget Report (PBR) day and Budget Day are always quite a trying time for those of us beavering away in the Private Client world. Firstly, we have to quickly digest and disseminate the Chancellor’s announcements as they are made.  These are often relatively unexciting but, now and then, there are surprises.  We then spend the next few days picking our way through HMRC briefings and comment to see if there might be any horrors hidden away that were not immediately identifiable on Budget Day itself.

Well, my afternoon meeting has ended and I’ve been “fortunate” enough (within the last 10 minutes) to walk straight from the meeting room to the television screen.  What do I find?  No attempt to divert attention away from the nasties!

Here’s a brief resume of what (at first glance) it seems the Chancellor has in store for us for 2010/11:

All tax thresholds and allowances will remain the same in 2010/11 as for 2009/10.

This should mean all personal income tax allowances remain the same and the Capital Gains Tax annual exemption will remain at £10,100 for individuals and £5,050 for Trusts generally.
For 2010/11, with just two small exceptions, all National Insurance Contribution (NICs) rates and thresholds are unchanged from 2009/10 levels.
However, for 2011/12, in addition to the 0.5% increases to rates already announced in 2008, the Chancellor has announced that there will be a further 0.5% increase to those rates, making a 1% increase in total from 6 April 2011.
Possibly of greatest significance to my clients, the Inheritance Tax (IHT) threshold will remain at £325,000 in 2010/11.  This is in spite of the Chancellor’s announcement in an earlier PBR that it would rise to £350,000 from 6 April 2010.

Clearly, the government is desperate for whatever cash it can get its hands on.  So, perhaps, it does not feel it needs to justify riding roughshod over the tax payer’s legitimate expectations.  Nevertheless, I expect that ministers will use a zero inflation climate to justify these freezes.

I’ve also just had a quick glance through HMRC’s list of PBR Notes.  There is a Note about introducing measures to close down (what are described as) IHT avoidance schemes involving trusts.  It seems that the measures are designed to effect:

 transfers into a trust where the settlor retains a future interest, or where a future interest in a trust is purchased, on or after today’s date and
 interests purchased in trusts on or after today’s date.

Still none the wiser?  The government’s and practitioner’s views about what is “avoidance” and what is “common sense planning” often differ!  Therefore, I think I need to examine these proposals further and digest some learned comment.  So, expect a further blog on this subject - but not for a few days yet!