Scrutton Bland Personal Adviser

Scrutton Bland Personal Adviser

scruttonbland.co.uk

Finance matters - Professional advice and support

Hammond delivers pre-Brexit Budget for a ‘brighter future’ Chancellor Philip Hammond delivered his second Autumn budget exactly five months before Britain is due to leave the European Union.

In a bullish mood the Chancellor asserted that the era of austerity is ‘finally coming to an end’ after a ‘long, hard journey. In his statement, the Chancellor outlined how individual tax payers are set to benefit from a bringing forward of the planned increase in tax personal allowance, which will rise by a further £650 in April 2019 to £12,500. The higher rate threshold will also increase from £46,350 to £50,000. However, from 2021, both thresholds will rise in line with CPI inflation. The tables on the right give an overview of the key personal tax changes to come out of the Chancellor’s budget:

2 | S C R U T T O N B L A N D | P e r s o n a l A d v i s e r

Income tax and personal savings The Chancellor announced a bringing forward of the planned increases in the personal allowance and higher rate threshold for income tax.

Income tax rates and bands 2019/20

2018/19

Band £

Rate %

Band £

Rate %

0 – 37,500

20 40 45

0 – 34,500

20 40 45

37,501 – 150,000

34,501 – 150,000

Over 150,000

Over 150,000

Savings income

2019/20

2018/19

Savings allowance basic rate

£1,000

£1,000

Savings allowance higher rate £500 A starting rate for savings band of £5,000 at 0% may be available unless taxable non-savings income exceeds the starting rate band. £500

Dividend income

2019/20

2018/19

Dividend allowance Dividend ordinary rate Dividend upper rate Dividend additional rate

£2,000

£2,000

7.5%

7.5%

32.5% 38.1%

32.5% 38.1%

Personal allowances

2019/20 £12,500 £100,000

2018/19 £11,850 £100,000

Personal allowance

Personal allowance income limit

Marriage allowance Transferable between certain spouses where neither pay tax above the basic rate

£1,250

£1,190

Married couple’s allowance (relief given at 10%) Either partner born before 6 April 1935

£8,950

£8,695

• Minimum amount

£3,450 £29,600

£3,360 £28,900

• Income limit

Blind person’s allowance

£2,450

£2,390

Stamp Duty Land Tax (SDLT) and first-time buyers relief As from 22 November 2017, first-time buyers in England and Northern Ireland paying £300,000 or less for a residential property pay no SDLT. First-time buyers paying between £300,000 and £500,000 pay SDLT at 5% on the amount of the purchase in excess of £300,000. In his Autumn Budget the Chancellor announced an extension to first-time buyers relief in England and Northern Ireland so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property. This change will apply to relevant transactions with an effective date on or after 29 October 2018, and will also be back dated to 22 November 2017 so that those eligible who have not previously claimed first-time buyers relief will be able to amend their return and claim a refund.

If you need help with any aspect of your tax planning, call our team today or email hello@ scruttonbland.co.uk

P e r s o n a l A d v i s e r | S C R U T T O N B L A N D | 3

Tax rules on divorce As the Brexit debates rage on, separation and divorce are topics which often feature in the headlines. But what about when divorce involves people, rather than nations?

Divorce can be one of the most difficult and stressful processes which an individual has to face, so worrying about whether you are paying unnecessary tax is an additional problem which most people could do without. However, with the right professional advice, tax planning needn’t be so stressful. Here we try and explain some of the financial legislation which may affect a settlement. Capital gains tax (CGT)

Following the tax year of permanent separation, but before the Decree Absolute, spouses and civil partners are still classed as connected persons for CGT purposes. This means any transfer of assets will be deemed to have taken place at market value, regardless of whether any actual proceeds were received. Therefore CGT will be due on the market value less the cost of the asset. If the asset has appreciated significantly since acquisition, there could be a large amount of CGT due. Conversely, any assets transferred which are sitting at a capital loss will result in a “clogged loss”. Generally capital losses are set off against capital gains of the same year or carried forward to set off against subsequent gains. Where a loss arises on a disposal to a connected person, the loss can only be set off against gains from the same connected person. If a loss arising as part of the divorce settlement cannot be offset by other gains, the potential to use this loss in the future is severely restricted.

Where a transfer of assets does result in a gain, it will be liable to CGT at 10% for any gain falling within the basic rate band (18% for residential properties) and 20% for gains falling within the higher rate band (28% for residential properties). Certain assets may qualify for the Entrepreneurs’ Relief rate of CGT of 10%, however qualifying conditions have to be met.

When a couple is married and living together, any transfer of assets between them will take place at “no gain / no loss” (NG/NL) meaning that no CGT will be payable. However this tax benefit of marriage ceases at the end of the tax year following permanent separation and not on the legal divorce (Decree Absolute). The tax year runs from 6 April to the following 5 April therefore the closer a couple separates to 5 April, the less time they will have to transfer any assets if they wish to make use of the NG/ NL rule. “However this tax benefit of marriage ceases at the end of the tax year following permanent separation and not on the legal divorce”

If you would like to discuss any aspect of tax planning following separation or divorce contact our tax team on 0330 058 6559 .

4 | S C R U T T O N B L A N D | P e r s o n a l A d v i s e r

Private Residence Relief (PRR): One of the largest and most important assets is often the matrimonial home. This may end up being sold to a third party, or one party to the marriage transferring all or part of their share to the other as part of the settlement. Generally, if an individual has lived in the matrimonial home for the entire period of their ownership then the whole of their gain on the property will be covered by PRR. However, if there have been periods where the property was not lived in or another property had been elected to be the main residence for CGT purposes, the relief could be restricted. Provided a property has previously qualified for the relief, the last 18 months of ownership will always be classed as deemed occupation which means PRR will be available for this period. Potential CGT charges therefore arise where one party moves out of the matrimonial home and the time to agree a settlement and effect transfers exceeds 18 months.

Other taxes Income tax is not charged on the transfers under a divorce settlement. If however an income generating asset is allocated as part of the settlement, the transferee will be subject to income tax on any income from the date of transfer. Transfer of assets remain exempt from inheritance tax (IHT) until the date of Decree Absolute (although the exemption is limited to £325,000 if the transfer is to a non-domiciled spouse). Transfers after Decree Absolute are potentially exempt transfers (PET) and will be exempt from IHT if the donor survives seven years. Property transferred between spouses under a court order is not subject to Stamp Duty Land Tax, even if the transferee takes on a mortgage. A divorce is often complex. It will be important to review all matrimonial assets and seek advice with regards to planning to ensure settlements are structured in the most efficient way and that no one is unintentionally left with an unwelcome tax charge. It is often a requirement of a Court Order that an independent Expert Witness Report is obtained to document the CGT implications of any divorce settlement. If you need advice or professional support for your tax planning, speak to one of our Personal Tax team who will be happy to help .

However there are special rules on divorce which allow the relief to be extended if all of the following conditions are met: • One spouse or civil partner stops living in the family home because they have separated • The partner that moved out has not formally elected with HMRC for another house to be their main residence • The partner that moved out later transfers their interest in the family home to their ex • The other partner keeps living in the family home as their main residence • The transfer is made as part of the divorce settlement

This special rule does therefore not apply if the home is sold to a third party.

Care also needs to be taken by the spouse giving up the ownership of the former family home where they have acquired a new residence, because generally only one property at any one time can qualify as the PRR.

P e r s o n a l A d v i s e r | S C R U T T O N B L A N D | 5

Investing made easy Did you know you can now open an investment online from as little as £50 a month?

6 | S C R U T T O N B L A N D | P e r s o n a l A d v i s e r

Accessible, online investing We understand that when it comes to managing your savings, you don’t always need advice, that’s why we developed a flexible online investment facility designed to give you access to your account 24 hours a day, 7 days a week, meaning you can manage your money in the way which suits you.

How does it work? If you recognise that your money could be working harder for you, but are not confident about putting together your own portfolio, sbinvest will design a portfolio for you. Based on a series of questions asking you to rate things like your appetite for, and resilience to risk, our online facility will present you with a risk profile which can help you decide if you would like to go ahead. Once you have decided to invest, simply enter your details and your investment will be open – it’s that easy. Investment choices There is a common misconception that an investment ISA will only invest in stocks and shares or equities, but that is not the case for the investment portfolios within sbinvest. Each of our 10 risk-graded options has a blend of different asset classes including exposure to commercial property funds, fixed interest securities and equities across the globe including the UK, Europe, America and Emerging Markets*. sbinvest portfolios are also designed to be rebalanced on a quarterly basis, so it’s not a case of signing up to a fixed selection of asset classes, which you are stuck with for years to come.

If you want to start investing from the comfort of your own home or office, sbinvest is the ideal solution. Whether you have a lump sum to invest, or want to get into the habit of saving, with a minimum investment amount of £50 a month, sbinvest is an easy and flexible solution. Different options to suit your needs With two different options available, you can choose how you would like to invest. For larger, or one off deposits you can open a general investment account, or if tax efficiency is what you’re looking for you can open an ISA. As long as you remain within your annual allowance of £20,000 for the current tax year, even if you have opened an ISA elsewhere, you can open an sbinvest account. You can also transfer an existing ISA in to sbinvest if you wish, meaning you can keep all your investments together in one place.

Some great features ✓ ✓ Benefit from tax savings ✓ ✓ Start investing from as little as £50 per month ✓ ✓ Stop, start and change your monthly payments ✓ ✓ 24/7 access ✓ ✓ Follow the performance of your investment from your laptop or mobile device ✓ ✓ Choice of investments via a flexible portfolio

Get started today by visiting www.scruttonbland.co.uk

Individual Savings Accounts (ISAs)

Individuals can invest in any combination of cash stocks and shares up to the overall annual subscription limit. However, a saver may only pay into a maximum of one Cash ISA, one Stocks and Shares ISA, one Innovative Finance ISA and one Lifetime ISA. The overall investment limit for 2019/20 is £20,000 (£4,368 for junior accounts)

* The value of your investments can go down as well as up.

P e r s o n a l A d v i s e r | S C R U T T O N B L A N D | 7

0330 058 6559 scruttonbland.co.uk

@scruttonbland

Scrutton Bland Financial Services Ltd is authorised and regulated by the Financial Conduct Authority. 0326/11/2018/MKTG