Accountants - How Could We Help You and Your Clients?

Goddard Perry Consulting Independent Financial Advisers

We are keen to establish connections with accountancy firms to add value to the service you are offering.  As Independent Financial Advisers we can assist your clients negotiate the ever-changing legislation surrounding pensions and give advice with a view to minimizing their potential tax burden as well as all other areas of wealth planning.  Working together with you, we would be able to ensure that the client gets the financial advice needed.

Here’s a few ways Goddard Perry Consulting Ltd financial planners could help your clients:

In the Budget on 15 March 2023, the Government announced several changes to the annual allowance, lifetime allowance and tax-free cash. This was followed by the Finance (No.2) Act 2023 which put some of these changes into legislation from 6 April 2023. Other changes announced in the Budget and the 2023 Autumn Statement will not take effect until the 2024/25 tax year. 

Instead of one lifetime allowance, savers will have two new main allowances to contend with. These allowances are designed to limit the pension tax-free lump sums people can receive in life and the tax-free lump sums they can pass onto beneficiaries when they die. Where previously pension withdrawals over the lifetime allowance could be subject to a lifetime allowance tax charge, savers can now take as much income as they want from their retirement pot, with just income tax to pay on pension withdrawals. 

However, the decision to get rid of the lifetime allowance hasn’t led to simplification because these rules are not at all simple, with over 100 pages of new legislation. Our financial planners can identify which of your clients are affected by these changes and work with them to figure out the best way forward to make the most of their tax-free allowances.

There are a number of ways that VCT’s may be beneficial to your clients when planning their finances and taxation.  I have provided a couple of examples below:

How higher earners can reduce their tax burden through a VCT - High earning clients can still find themselves facing financial challenges, or with liquidity needs in the not-too-distant future. For example, they may consider putting money into their pension, and although this is probably the most tax-efficient option available, they may be mindful that any large sums placed into their pension won’t be accessible until they turn 55.

If they would prefer not to tie up the money for that long, they could invest into a Venture Capital Trust (VCT). They would be able to claim up to 30% income tax relief on the investment, provided they hold the VCT shares for the minimum five-year holding period.

Also, as most VCTs target a dividend, they can expect to receive an annual tax-free income from their investment. VCT dividends are completely tax-free and there’s no HMRC requirement to declare them on tax returns.

The potential for regular tax-free VCT dividends could prove especially attractive for high earners, considering the tax-free dividend allowance will be reduced to just £500 from 6 April 2024. An additional-rate taxpayer would need to receive an annual gross income of more than 8% from a unit trust or investment trust to match the income earned from a 5% tax-free VCT dividend.

An alternative to pension planning - From a wealth management perspective, pensions are clearly the first place to start when it comes to retirement planning. Although the annual pension allowance was raised to £60,000 in 2023, the standard annual allowance is reduced by £1 for every £2 of adjusted income an individual has over £260,000. For those earning more than £360,000 the standard annual allowance for the 2023/24 tax year is reduced to just £10,000. Clients in this position therefore still need a tax-efficient investment alternative to complement their pension arrangements.

While pensions have strict rules and limitations on when and how much money can be accessed, a VCT investment can be accessed after the minimum five-year holding period. Also, as well as reducing a clients income tax bill, most VCTs will target an annual dividend, meaning the client can expect to receive an annual tax-free income from their VCT investment, and there’s no HMRC requirement to declare VCT dividends on their tax returns.

For Example:

Prime minister Rishi Sunak is reportedly considering a cut to inheritance tax, ahead of the next general election.

We’ve all seen the stories about inheritance tax (IHT) being dubbed ‘Britain’s most hated tax’, despite the fact that according to statistics published by HMRC in July 2023, only 3.73% of estates actually paid IHT in 2020/21. This apparent widespread animosity may be due to the fact that IHT taxes everything on death, including wealth that has already been subject to tax as it arose. Income that has suffered 45% tax on receipt and loses a further 40% on death suffers an effective 67% tax rate overall.

Abolition would therefore appear to be politically attractive, but there are complications. One obvious point is that in 2020/21, IHT raised £5.76bn in tax, and its estimated it will generate close to £8bn in this financial year. If IHT is abolished, this tax will either be lost or require replacement, which could create some distinct issues that taxpayers may not appreciate.

Abolishing IHT sounds like a crowd-pleaser, but it could easily have the opposite effect to the one intended. Instead of removing a tax burden on death, abolition could actually spread it wider, capturing more estates and creating liabilities for families who would currently never be affected. IHT may be today’s ‘most hated tax,’ but it could easily be replaced with an alternative that’s even less popular.

Our independent financial planners will be able to help your clients plan following any changes made in legislation, to potentially mitigate tax liabilities that may be created if new tax rules are introduced on death.

For further information about us and what services we can offer please refer to our website www.goddardperry.com

We would be very keen to speak to you about the possibility of forming a strategic partnership that would benefit your firm and clients. We could also discuss putting in place an ‘Introducer Agreement’ whereby you would receive a percentage of the initial fee we earn from any clients that you refer to us of up to 25%.

If you would like to arrange a mutually convenient time to discuss the above in more detail, then please don’t hesitate to get in touch.

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