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1."What do you mean, you hate to travel?"

Have you and your spouse actually sat down and discussed how each of you envisions retirement? If your dreams are completely opposite of your spouse's, both of you are going to be disappointed. Talk honestly your retirement plans and goals before you get the gold watch. Be creative and open to compromise, so that both of your dreams can come true.

2."You mean, you're here ALL the time, now?"

Spending all this quality time together may seem like a wonderful idea, but remember, you both have daily routines, some of which may have been 30 years in the making. Also, you're not used to spending 24 hours a day, 7 days a week in each other's company. Recognize and respect the needs both of you have for space, as well as each other's routines.

1."What do you mean, you hate to travel?"

Have you and your spouse actually sat down and discussed how each of you envisions retirement? If your dreams are completely opposite of your spouse's, both of you are going to be disappointed. Talk honestly your retirement plans and goals before you get the gold watch. Be creative and open to compromise, so that both of your dreams can come true.

2."You mean, you're here ALL the time, now?"

Spending all this quality time together may seem like a wonderful idea, but remember, you both have daily routines, some of which may have been 30 years in the making. Also, you're not used to spending 24 hours a day, 7 days a week in each other's company. Recognize and respect the needs both of you have for space, as well as each other's routines.

As many of our clients are aware, RIS held a Market Update Seminar on 14th October 2010 at the prestigious Hampshire Office of Brooks Macdonald Asset Management.

To say the seminar was well attended is somewhat of an understatement and conditions were a little cramped, however we were delighted to see so many of our clients and hope they gained a valuable insight into investment markets.

Our guest speaker was John Wallace of Brooks Macdonald who provided a comprehensive and thought provoking presentation which prompted a valuable Q&A session.

A copy of the slides can be found here.

Budget Summary 2011

"Let it be heard clearly around the world ... that Britain is open for business."

It took George Osborne just under an hour to deliver his second package of measures as Chancellor today. He began his statement by declaring that last year's emergency Budget was about rescuing the nation's finances, and paying for the mistakes of the past whereas today's Budget is about reforming the nation's economy, so that we have enduring growth and jobs in the future, with a focus on the Government doing what it can to help families with the cost of living and the high oil price. The Budget was not particularly aimed at raising tax but neither was it ever expected to be a giveaway.

The Budget contained various measures to encourage enterprise, exports, manufacturing and investment. The Government sought to encourage foreign business with a corporation tax cut in an otherwise tough annual Budget, as it acknowledged that domestic economic growth this year will be much lower than anticipated. A good deal of focus was placed on attempts to encourage entrepreneurial activity and attract international business with Britain aiming to be the most competitive tax system within the Group of 20 emerging and industrialised nations as well as the "best place in Europe to start, finance and grow a business." Corporation Tax cuts will eventually mean that the UK rate will be 16% lower than the US, 11% lower than France and 7% lower than Germany.

Osborne also flagged changes to the tax regime for wealthy non-domiciles and a potential abolition of the unpopular 50% tax rate for higher earners.

The fuel price increase has been postponed until next year and a price reduction introduced instead which is welcome news in these times of rising unemployment and rising food prices. The reduction is being funded by way of a ‘tax grab’ on the North Sea oil companies.

The Office for Budget Responsibility (OBR) has downgraded its forecast for GDP growth for 2011 to 1.7% compared with the 2.1% it predicted in November, because of rising commodity prices, higher inflation and a shock 0.6% contraction in fourth-quarter GDP. It also raised its inflation forecast to between 4 and 5% (previously 3%).

George Osborne compared the UK situation with those of some of our European neighbours - market interest rates in Greece are 12.5%, in Ireland they are close to 10%, in Portugal and Spain they are 7% and 5%. The UK market interest rate is currently 3.6%. The UK has a higher deficit than Portugal, Greece and Spain, but virtually the same interest rates as Germany. This was quoted as our powerful monetary stimulus to our recovering economy.

The inflation target for the Monetary Policy Committee will remain at 2%, as measured by the Consumer Prices Index.

Our summary of the main changes of relevance to financial planning is given below and we will be in contact with any clients that are personally affected by any changes. The Finance Bill is due to be published on 31 March but it is possible that changes may occur before it receives Royal Assent to become the Finance Act so it is important to bear this in mind.


Personal Taxes and related areas


Income tax, Personal Allowances and National Insurance Contributions

For 2011/12, all income tax rates and thresholds (including personal allowance) will remain at the levels announced in the Emergency Budget in June 2010, e.g. the income tax personal allowance for those aged under 65, is set at £7,475 (2011/12) and the basic rate limit will be reduced to £35,000 in order that higher and additional rate taxpayers do not benefit from the increase in personal allowance.

For 2012/13, the personal allowance for under 65s will increase by a further £630 to £8,105 with the basic rate limit again being reduced by an equivalent £630 leaving the higher rate threshold unchanged.

The net effect being (in both tax years) that this does not create any additional higher rate taxpayers.

The main and additional rates of NICs will increase by one per cent. The primary threshold will increase to £139 per week and the secondary threshold for employer NICs will to £136 per week. The upper earnings and profits limits for NICs will be reduced by £1,400 so that they remain aligned to the higher rate threshold.


Review of non-domicile taxation

There is currently a beneficial tax regime for non-domiciles regardless of how long they have been resident in the UK. However, the rules mean that foreign income and gains are taxed if they are brought to the UK and this is a disincentive to inward investment. The Government intends therefore to introduce the following reforms:

  • remove the tax charge when non-domiciles remit foreign income or capital gains to the UK for the purpose of commercial investment in UK businesses;
  • simplify some aspects of the current tax rules for non-domiciles to remove undue administrative burdens; and
  • increase the existing £30,000 annual charge to £50,000 for non-domiciles who have been UK resident for 12 or more years and who wish to retain access to the beneficial tax regime (the remittance basis). The £30,000 charge will be retained for those who have been resident for at least seven of the past nine years and fewer than 12 years.

The Government will be consulting on the detail of this measure and will issue a consultation document in June. The Government intends to implement these reforms from April 2012.


Statutory residence test

The current rules that determine tax residence for individuals are unclear and complicated. The Government will be consulting on the introduction of a statutory definition of residence to provide greater certainty for taxpayers. It will issue a consultation document in June and intends to implement the measure from April 2012.


Reduced Child Care Relief for High Earners

Income tax relief will be restricted to the basic rate for individuals who have joined their employer-sponsored childcare scheme on or after 6th April 2011, by reducing the monetary value of the income tax exemption for higher and additional rate taxpayers.


Approved Mileage Allowance Payments

With effect from 6th April 2011 the approved Mileage Allowance has increased from 40p to 45p per mile for the first 10,000 miles of business travel in the tax year.  This is the amount that employees, who use their own cars for business mileage, can claim from their employers that is not regarded as a taxable benefit.  This is also the amount that can be used by individuals to claim mileage allowance relief, where individuals are paid less than the approved amount by their employer.


Company Car Tax

The rate will be reduced by 1% from April 2013 for all vehicles with carbon emissions between 95g and 220g.  Zero emission cars will remain at 0% and ultra low emission cars (up to 75g) will remain at 5%.


Fuel Benefit Charge

For employees and directors who are provided with a company car and who also receive free fuel.  With effect from 6th April 2011 the multiplier will be increased from £18,000 to £18,800.  This is multiplied by the appropriate percentage for the car based on its CO2 emissions to give the cash equivalent taxable benefit.


Income Tax and NICs reform

The Government will consult on the options, stages and timing of reforms to integrate the operation of income tax and National Insurance contributions (NICs) in order to remove distortions created by the tax system, reduce burdens on business and improve fairness for individuals. A consultation document will be published later this year setting out the differences in the current income tax and National Insurance systems, and options to address these. The Government will maintain the contributory principle and reflect this in any changes it brings forward. The Government will not extend NICs to individuals above State Pension age or to other forms of income such as pensions, savings and dividends.



The Government has considered the three options on IR35 set out in the Office of Tax Simplification’s report on its review of small business, published on 10 March on the HM Treasury website, and has decided that it cannot put substantial tax revenue at risk. IR35 is, therefore, being retained but simplified by making improvements to the way in which it is administered.


Change to the indexation of direct taxes

Currently, all direct taxes, e.g. income tax, NICs, inheritance tax, capital gains tax, along with ISA limits are amended in line with RPI. As from April 2012 this will change to CPI, except where there are specific commitments to a different amount.


Inheritance Tax

The inheritance tax nil rate band (NRB) was already frozen until April 2015. However, after this date CPI will be used as the indexation assumption.

A new rate of inheritance tax (IHT) will be introduced (36%) for estates where 10% or more of the net value has been left to charity. However, the relief is designed so that the benefit of the tax saving is reflected in the bequests received by charities and not in payments to other beneficiaries. Full details are not yet available.

As previously announced, the disclosure of new and innovative IHT avoidance schemes involving transfers into trust will be brought within DOTAS. This will come into effect on 6 April 2011.


Capital gains tax

The annual exempt amount (AEA) for capital gains tax will increase in line with RPI to £10,600, with effect from 6 April 2011. However, for future years CPI will be used as the indexation assumption.

Entrepreneurs’ relief will again be increased. With effect from 6 April 2011 the lifetime limit on qualifying gains will increase from £5 million to £10 million.


Stamp Duty

In an attempt to strengthen demand for residential property and promote the private rented housing supply, the Government has announced a reform of the stamp duty land tax (SDLT) rules applied to bulk purchases. Currently, a buyer pays SDLT on the aggregate value of the purchase of multiple residential properties. However, they will now have the option to have the rate determined by the mean value of the properties purchased (subject to a minimum rate of 1%).


Furnished holiday lettings (FHL)

Legislation is to be introduced to the effect that loss relief may only be offset against income from the same FHL business. This will be effective from April 2011.

As from April 2012, the time for which a property is ‘available’ to let, is to increase to 210 days and must be actually let for 105 days in order to qualify.

Letting and availability thresholds are to be increased from April 2012.


Gift Aid

Where a benefit is received as recognition of a donation, the charity may provide a ‘benefit’ as a ‘thank you’. The Gift Aid status is retained providing the benefit does not exceed £500. This is to increase to £2,500, as from April 2011.

As from April 2013, charities will be able to claim Gift Aid on small donations (up to £5,000) without the need for Gift Aid declarations. 


Investment issues


ISA & Junior ISA

In keeping with the change to CPI indexation for direct taxes, the annual ISA subscription limit will increase in line with CPI, rather than RPI, from tax year 2012-13.

As previously advised, the Junior ISA is to be introduced from autumn 2011.  Eligible children will be all those under age 18, who are UK resident and do not have a Child Trust Fund.  The Junior ISA is expected to be very similar to the current ISA.  Both Cash and Stocks & Shares ISAs will be available.  The legislation is still in draft form and proposed account features and processes will be published on 31st March alongside the Finance Bill.



As part of the focus on increasing investment into small businesses, the Government will reform the EIS and VCT, making the following changes (subject to State aid approval):

From April 2011 the rate of income tax relief available via an EIS investment will increase from 20% to 30%.

The following changes will take effect from April 2012:

  • The annual EIS investment limit for individuals will double from £500,000 to £1 million.
  • The qualifying company limit for both EIS and VCT will increase to 250 employees and £15 million gross assets before investment (currently 50 employees and £7 million before investment).
  • An increase in the maximum investment per company to £10 million (EIS & VCT)
  • Investment in feed-in-tariffs (FITs) will be excluded from EIS and VCT investment unless commercial electricity generation commences before 6th April 2012.  Shares issued before 23rd March 2011 will not be affected.

The Government will consult on further changes including proposals to give additional support through the EIS for seed investment.


Enterprise Zones & Enterprise Zone Schemes

The creation of 21 new enterprise zones was announced in the Budget.  10 locations throughout the UK have already been identified, plus 1 in London to be confirmed.  A further 10 will be identified later this year.

Under these zones, businesses will be able to claim up to a 100% business rate discount for five years.

The Government will also consider scope for introducing enhanced capital allowances to support enterprise zones in limited areas where there is a strong focus on high value manufacturing.

The introduction of these new zones could create a new flow of Enterprise Zone Schemes into the market, whereby capital allowances can be claimed on qualifying capital expenditure incurred on the construction of an industrial or commercial building (subject to certain restrictions) in a current Enterprise Zone.  These investment schemes are now few and far between as the expenditure must be incurred within 10 years of the site first being designated as an Enterprise Zone (which have now all expired),  unless in the possession of a ‘Golden Contract’, where the expenditure was incurred under a contract entered into during the life of the zone.


Offshore Funds/UCITS IV

Under current rules, UCITS funds established and regulated in an EEA member state, but which have a fund manager resident in the UK, may be deemed tax resident in the UK and therefore subject to UK tax.  Legislation is proposed to be included in the Finance Bill which will treat a UCITS fund that is established and regulated in another EEA state as not being resident in the UK, thereby clarifying UK tax treatment for these investments.


Real Estate Investment Trusts (REITs)

The Government is to enter into an informal consultation with the industry and representative body on REITs legislation shortly after the Budget, with proposed legislation to be introduced the Finance Bill 2012.  The aim is to reduce barriers to entry and investment, including relaxing the requirement for a UK-REIT to be listed on a recognised stock exchange, and to reduce the regulatory burden for REITs. 


Investment Trusts (ITCs)

Legislation will be introduced in the Finance Bill 2011 with the aim of making the UK a more competitive domicile of Investment Trust Companies, while ensuring that UK investors continue to choose their investments for commercial rather than tax reasons.  This follows a consultation and Government response last year.  The measure involves the removal of the annual approval obligation for around 200 ITCs and the streamlining of in-year compliance.




Corporation Tax

The main rate of corporation tax is to be reduced by 2% from April 2011, down to 26%, followed by further reductions of 1% in each of the following three years, resulting in a rate of 23% by 2014.

The rate applicable to small profits will reduce to 20% as previously announced.




Restricting pensions tax relief

The Government has already announced on 14 October 2010 that the annual allowance for tax relief on pension savings for individuals will be reduced from £255k to £50k from 2011/12, and the lifetime allowance will be reduced from £1.8m to £1.5m from 2012/13. Additional draft legislation was published on 3 March 2011 containing provisions to enable individuals to meet high annual charges from their pension benefits where charges exceed £2,000.


Removal of compulsory annuitisation at age 75

Legislation will be introduced in Finance Bill 2011 to remove the effective requirement to annuitise by age 75 from April 2011. This will include changes to the annuitisation requirements, income drawdown pension arrangements and the related inheritance tax rules. During the consultation on draft clauses some unintended differences in the pensions and lump sums payable before and after age 75 were identified. Changes have been made to the legislation to remove these differences. Savers who have reached age 75 will also be allowed to align multiple drawdown pension funds under the same scheme so the funds can all be valued annually on the same date.


Contracting out

Defined benefit scheme contracting out rebates are reducing from 3.7 to 3.4% (employer) and 1.6 to 1.4% (employee). Defined contribution contracting out is to be abolished from 6 April 2012.


State Pension

State Pension ages will be reviewed regularly in line with changes in longevity.

The Government intends to introduce a single tier state pension at roughly £140 pw but that it won’t take effect for ‘years’. Current pensioners and those claiming their state benefits before the new rules are introduced won't be affected by the changes, which are expected to be phased in gradually. George Osborne said top-ups to the basic state pension of £97.65 a week – credits for poorer retirees and the second state pension, specifically – mean people 'can't work out what they'll get in retirement'. A flat-rate scheme would scrap these extras to create a simple £140 a week payment to all. However, it would still be based on contributions.


Anti-Avoidance Measures

There were a number of measures announced to clamp down on tax avoidance, as shown below:


Disguised Remuneration

Where employers have used trusts and third party arrangements to provide an employee with a reward, recognition or a loan in connection with the employee’s employment this will now be subject to tax though the PAYE system.  The income tax charge will be based on the highest of:

  • The sum of money made available; or
  • The cost or market value of the asset in question.

The second point is where the asset in question is transferred or made available for an employee’s use and benefit as if the employee owned the asset.

This includes Employer Financed Benefit Schemes (EFRBS) and third party arrangements that have been used to remunerate individuals above the annual and lifetime allowances.  It does not include arrangements that have not been used to avoid tax, such as genuine deferred remuneration arrangements, common in the financial service sector, and which last less than 5 years and genuine commercial arrangements for the provision of designated employee car ownership schemes.

This change to income tax applies to rewards which are earmarked for an individual employee, or otherwise made available, on or after 6th April 2011, as if they were paid as income on that date. 

Where rewards have been earmarked or applied between 9th December 2010 and 5th April 2011 anti-forestalling legislation will apply.  For these individuals a charge to income tax will arise on 6th April 2012 if they have not repaid, or returned assets, before that date.

Amended legislation will be introduced in Finance Bill 2011 together with a new Explanatory Note explaining how the amended draft schedule will operate.  Regulations will also be brought forward shortly to apply NICs to amounts chargeable to tax under this measure.


Other anti-avoidance measures

Stamp Duty Land Tax – With effect from 24th March 2011, the schedule makes three changes to ensure that certain avoidance schemes are ineffective.  For the purposes of Alternative Finance (AF) reliefs, it will no longer be possible to qualify as a ‘financial institution’ just by holding a Consumer Credit Licence.  The interaction of sub-sales and the AF reliefs will no longer be combined to remove all SDLT charges and the chargeable consideration for exchanges involving a major interest in land will be changed to the greater of market value and what the chargeable consideration would be under the normal rules for consideration (it was previously the case that stamp duty was payable on exchanges of land to the extent that there was an equalisation payment).

Sale of Lessor Companies – Ensuring that corporation tax is not avoided through a change of ownership of a leasing company and withdrawing the option to elect out of the sale of the lessor company.

Corporate Gains Degrouping Charge – Legislation will be introduced  in the Finance Bill 2011 to prevent groups of companies avoiding corporation tax on chargeable gains by using complex arrangements that seek to exploit a perceived flaw in the degrouping charge rules.


Other issues



First Time Buyers
First Time Buyers are to be helped with the provision of equity loans, jointly funded with house-builders, through a ‘FirstBuy programme’. £250 million is to be provided to assist over 10,000 first time buyers to purchase a new-build property.

Support for Mortgage Interest (SMI) scheme
The ‘Support for Mortgage Interest (SMI) scheme’ is to be extended for a further year until January 2013.


Bank Levy

This will be a tax based upon the total chargeable equity and liabilities as reported in the relevant balance sheets of affected banks and building society groups at the end of the chargeable period commencing 1st January 2011 and further increased from 1st January 2012.


Protection Life Insurance

Legislation is to be introduced to remove protection business from the ‘income minus expenses’ life tax system designed to tax investment type business and align it with the tax treatment of other trading entities. The change will be effective from 1 January 2013. This is likely to result in increased premiums from life offices which offer investment contracts


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Contact us

Retirement and Investment Solutions
5 Lancer House, Hussar Court
Hampshire, PO7 7SE

T: 01489 878300
F: 0870 0104883