Article by Phil
People in the UK would benefit from talking to a financial expert to make sure that their personal finances are as tax efficient as possible.
That comes on the back of the latest data from the Tax Foundation which has rated the UK as the sixth worst country for tax out of the 38 OECD countries. That’s due to our high tax rates and complex tax rules. Only France and Italy are worse in Europe.
In terms of personal taxes, the UK has fallen five places to 25th out of the 38 countries. This is as a result of the increases in Capital Gains Tax (CGT) and Employers National Insurance in last year’s budget. With Inheritance Tax (IHT) on pensions looming, talking to a financial expert like Christina could save you money.
According to the Centre for Policy Studies all is not lost and there are things that the government could do to improve the UK’s tax position. Some of these include:
- Abolishing Stamp Duty
- Raising the IHT threshold.
- Lowering Corporation Tax and
- Allowing tax deductions for all capital expenditure.
It remains to be seen whether the government will take any notice. Talk of a wealth tax is very concerning and would push the UK even further down the tax league table.
Pensioners paying the most tax.
HMRC has confirmed that almost 2.5 million people are now paying tax on the interest they’ve earned from their cash savings. 45% of those paying tax are pensioners. Not surprising since the last time the cash savings tax band was over 10 years ago.
Some of the 1.1 million pensioners paying tax are now well over 90 years old. There are now 625,000 over 90’s in the UK and 16,000 people over 100 years old. That’s a long time to still be paying tax isn’t it.
Things could become worse after the budget. If income tax thresholds remain frozen, another 500,000 pensioners would be liable to pay tax. That would take the number of tax paying pensioners up to 9.3 million. Before the tax thresholds were frozen in 2021/22 only 6.7 million pensioners paid tax.
Inheritance Tax becoming an issue.
We’ve already looked at the impact of the government introducing pensions into the IHT calculation. But we’ve not really considered the wider impact this could have on the whole probate and inheritance market. John Bunker tax specialist from law firm Irwin Mitchell told the Finance Sub Committee that he was very concerned that people would not want to act as executors or personal representatives in the future. That includes law firms and other financial experts who could face pressure on their Professional Indemnity Insurance premiums.
All because the onus for calculating the correct IHT is set to fall on the executor. This includes calculations of pension income from 2027. The liability for incorrect declarations will fall on the executor. Will it worth taking the risk? What will be the effects if probate is delayed? It could mean less tax is collected rather than more. It will certainly cause delays in settling estates which will be detrimental to the beneficiaries.
It’s a can of worms waiting to be opened.
But financial expert recommend investment ISA’s.
According to analysis by Chelsea Financial Services, over the last 25 years investment ISA’s (in global equities) delivered a 474% growth. Compared to 80% growth over the same period for cash ISA’s. Over that period £856 billion has been invested into cash ISA’s and £453 billion into investment ISA’s.
Probate delays already on the rise.
According to probate firm Level Group, 29 million people expect to receive some form of inheritance over the next 20 years or so. 5 million of those people said that without the inheritance they would be in debt. That’s a lot of expectation. Naturally this also causes family tensions.
According to the Ministry of Justice (MOJ) probate disputes have risen by over a third in the last 10 years. Level Group also found that 40% of people would be prepared to dispute a Will in court if they thought that their inheritance wasn’t what they thought it was. The MOJ also released figures showing that the number of probate cases taking over a year has risen fivefold over the last 5 years.
It’s not just probate delays which are causing problems. There are an increasing number of reports about pension providers delaying payouts on death because of pedantic requests for documentation in a particular form, including not accepting electronic copies (even certified copies). It was reported that one lady had been waiting eight months for Aviva to pay out because her husband’s death certificate did not state the cause of death. Make sure you have all the relevant original documents to hand or know where they all are, it will save you delays in the long run.
Get more information.
If you need advice from a financial expert then why not contact Christina today. She offers a free initial meeting to discuss your requirements and explain how our service works. You are under no obligation to use us after that if you don’t want to and we won’t pester you.
So why not call us today on 01282 614444 or e mail us enquiries@ccfps.co.uk or use our contact form online.
