The 2010 Budget was preceded by great anticipation. Yet, following the announcement, it is clear that this year's Budget doesn't usher in any dramatic changes for investors. However, with the UK making a slow journey out of recession, and a general election imminent, there's already plenty of uncertainty to deal with. In this environment, a need remains for investors to have effective long-term financial plans in place.
Furthermore, higher earners have specific changes to contend with, relating to reductions in tax reliefs on pensions. Investors have been aware of these since the 2009 Budget and the Pre Budget Report late last year, and the changes have now all come into effect.
On the positive side however, we're very encouraged that the Chancellor has chosen to support owners of small businesses by increasing Entrepreneurs' Relief from £1 million to £2 million. Similarly, the announcement that the Government will examine the investment criteria for Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS), with a view to considering an increase in the size of company that can benefit from investment by VCTs and EIS, also bodes well for UK small and medium enterprises (SMEs).
Whatever investors' financial positions, and however policy evolves, tax-efficient products, including Inheritance Tax (IHT) solutions, VCTs and EIS, all offer a way to invest money during these uncertain times.
IHT threshold threshold frozen but IHT mitigation remains crucial
After all the media speculation around what each Party is going to do about the contentious issue of IHT, this Government has chosen to freeze the IHT threshold for the next four years. With the forthcoming general election, policy may again change, so being invested in a flexible IHT solution can help investors look after their money and be prepared for whatever changes politics brings. There are now a range of products on the market to suit different investor needs, which can all ensure that IHT remains a voluntary rather than stealth tax.
VCTs are becoming integral to long-term financial plans
Previously announced changes in tax policy have created a need for options beyond traditional pensions. Higher earners in particular need to consider new ways to plan for retirement. VCTs can be used as a complementary solution to a pension. They're particularly useful as, in contrast to traditional pension investments, the income from VCTs is not subject to income tax. Furthermore, whilst VCT investments have…
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Simon Rogerson
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