Child Trust Funds

I wanted to include some specific comments from the second Autumn Budget given yesterday by the Chancellor, Rachel Reeves. I am sure you will see and hear a lot over the next few days, but I wanted to provide you with a quick snapshot and to let you know I am here should you wish to discuss any of the points in more detail. Key points at a glance Income tax - Thresholds to remain frozen Announcement Personal tax thresholds will remain frozen until April 2031, extended from April 2028. Impact Income tax threshold and personal allowance freezes combined with increasing incomes will push more people into higher tax bands. This is known as ‘fiscal drag’ and is essentially a ‘hidden’ tax rise, with individuals on the cusp of tax thresholds and those in the higher and additional tax brackets impacted the most. Planning opportunities Spouse/civil partner planning: Utilise income-generating assets to take advantage of both spouses/civil partners’ individual personal allowances and tax bands. Increasing pension contributions: reduce taxable income while saving for retirement. Investing in Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs): These offer generous tax relief but carry higher risks, so seeking financial advice is strongly recommended. Charitable giving: Donations can lower your tax bill while supporting causes you care about. Rates to rise on dividend, savings and property income Announcements The tax rates on income from dividends will increase by 2% from April 2026. The tax rates on income from property and savings will increase by 2% from April 2027. Once the new rates are implemented, property, savings and dividend incomes will also be taxed later in the income tax calculation, lessening the effect of tax reliefs. This will be legislated for in the Finance Bill 2025-26. Impact Savings and property income: rates rise to 22%, 42% and 47%. Dividends: Rates increase to 10.75% and 35.75%, with the additional rate remaining at 39.35%. Reliefs and allowances will only be applied to property, savings and dividend income after they have been applied to other sources of income (which are subject to lower rates of tax) potentially increasing an individual’s overall tax liability. Planning opportunities ISAs and international bonds could complement or replace existing structures to provide a better tax position. Individuals may also wish to consider the structure (if any) in which they hold their properties. It could be prudent to bring forward dividend payments from businesses to avoid April 2026 rate increases. Consider triggering chargeable events on onshore and international bonds before April 2027 to tax gains under current (lower) savings rates. With thresholds frozen until 2031 and rates rising on savings, property and dividend income before then, individuals may find their tax liability rising significantly. As such, proactive planning with a financial adviser or wealth manager across all these matters is key. Pensions Announcement The government will charge employer and employee National Insurance contributions (NICs) on pension contributions above £2,000 per annum made via salary sacrifice, with effect from April 2029. Impact Reduced tax savings: Employees currently save up to 8% in NICs, while employers save 15%. The cap will erode these benefits for amounts over £2,000. Lower take-home pay: NI deductions on sacrificed income above £2,000 will shrink net pay. Employer incentives may decline: Higher National Insurance (NI) costs for employers could reduce their willingness to pass savings back to employees. Threshold planning disrupted: Higher earners (e.g. those near £100,000 incomes) may struggle to use salary sacrifice to reduce taxable income below key thresholds. Planning opportunities Optimise tax bands: Align pension contributions with your income tax bracket to maximise relief. Spouse/partner strategy: Balance income and assets between partners to leverage joint tax efficiency. Diversify investment structures: Use ISAs, general investment accounts and pensions to spread savings and minimise tax exposure. Maximise employer benefits: Ensure you contribute enough to qualify for full employer pension matching and confirm if NI savings are passed on. Review thresholds: If targeting income limits (e.g. £100,000), explore alternatives to salary sacrifice for reducing taxable income. High value council tax surcharge Announcements From April 2028, an annual high value council tax surcharge (HVCTS) will be levied on properties worth £2 million or more in England. The government will consult on the implementation of this additional charge in 2026, after which we expect further details to be made available. Threshold Annual rate (£) £2 million-£2.5 million £2,500 £2.5 million-£3.5 million £3,500 £3.5 million -£5 million £5,000 £5 million+ £7,500 Impact Roughly 145,000 properties will be affected, according to estate agent Savills. Ensuring there is sufficient liquidity to pay the charge may be a challenge for some (especially where the property in question is a main residence rather than a let property). This surcharge may also have an impact on the market value of affected properties due to the additional annual cost. Planning opportunities Ahead of additional information being provided, individuals may wish to consider the following but reserve action until further detail emerges: Property valuations will be important, including taking into account factors that may increase or decrease the value of a property that is close to the threshold. As the charge is applied to owners and not occupiers, consider whether renting a property (rather than buying) would be more attractive. Downsizing to a property with a lower value may reduce or eliminate the charge. It seems that properties in Wales and Scotland are currently not included, which could provide an opportunity for those located near the border. Consider whether trophy properties are owned in the UK or abroad. For example, a grander holiday home abroad and smaller UK property may be preferable. Tax planning around splitting ownership titles between multiple individuals or entities may provide opportunity. Reconfiguring a single property into smaller multiple properties may also be worth considering. Tax efficiency savings elsewhere may free up liquidity to pay this charge. Inheritance tax (IHT) Announcement The freeze to the IHT threshold of £325,000 and the residence nil-rate band of £175,000 per person (where available) have been extended a further year to April 2031. The £1 million allowance for the 100% rate of agricultural property relief and business property relief will be transferable between spouses and civil partners, including where first death was before 6 April 2026. Lifetime gifting rules and allowances remain unchanged. It’s worth remembering that the government is also implementing previously announced reforms meaning pensions are to become subject to IHT from April 2027 Impact More individuals’ estates will be pushed over the taxable threshold due to inflation and growth on asset values. The IHT threshold has been frozen at £325,000 since 2009 (if increased by CPI it would now be worth £523,000). Where someone dies over the age of 75, the recipient of their unused pension funds will pay income tax at their own marginal rate on withdrawals. From April 2027, if the pension is liable to IHT at 40%, beneficiaries subsequently paying the additional rate of income tax at 45% can face an effective tax rate of 67% on an inherited pension. Those with significant business assets, working farms or qualifying AIM shares may, for the first time, face an IHT liability on those assets. For a business owner with a shareholding of £10 million, the IHT liability could increase from zero under current rules to £1.8 million from April 2026. The transferable allowance for agricultural and business property will lessen the need for first death planning to maximise the allowance between spouses and civil partners. Planning opportunities Withdrawing the tax-free lump sum allowance from a pension and utilising this during your lifetime to fund spending or make gifts to family members remains an efficient way to reduce the value of one’s pension subject to IHT. Lifetime gifting, including the ability to make immediately exempt gifts out of excess income (as long as it doesn’t affect your standard of living), remains an effective way to reduce the value of one’s wider estate subject to IHT. Placing qualifying agricultural and business property into trust pre-April 2026 can be done without an IHT entry charge. From April 2026, only the first £1 million will be relieved should the settlor die within seven years, with the excess value facing an entry charge. For business owners anticipating an exit and wishing to set aside a portion of shares in trust as part of their succession plan, there remains a limited opportunity to place a larger value of shares in trust without an upfront charge. Cash ISAs Announcements The full annual Stocks & Shares ISA allowance remains at £20,000 per tax year. The cash ISA annual allowance will be cut from £20,000 to £12,000 per tax year from 6 April 2027. This change will not apply to over 65s, who will keep £20,000 Cash ISA allowance. Impact Could affect individuals’ ability to accumulate cash savings in a tax-efficient manner. Some cash savers may be risk averse to investing in a Stocks and Shares ISA. Planning opportunities Spouse/partner strategy: Balance income and assets between partners to leverage both allowances. Diversify investment structures: Use pensions, general investment accounts, ISAs, international bonds, corporates and private funds to minimise tax exposure. Over 65s: can continue to put the full £20,000 allowance into a Cash ISA. Re-evaluate saving objectives: short term vs long term. Those looking for low-risk, tax-efficient investing could consider using a Stocks and Shares ISA to invest in lower-risk strategies such as cash funds. Alternatively, individuals could look to gilts (government bonds) and corporate debt (qualifying corporate bonds) to generate tax-efficient returns. When held without a tax wrapper (e.g. in your personal name and not in an ISA, pension or qualifying corporate bond), they provide returns free of capital gains tax but are subject to income tax. As a result, low-yielding investments that generate returns through capital gains can be attractive lower-risk alternatives to cash ISAs. Capital gains tax (CGT) Announcements Capital gains tax (CGT) relief available on qualifying disposals to Employee Ownership Trusts (EOTs) has been significantly reduced from 100% to 50% of the gain, effective for disposals from 26 November 2025. The government cited the escalating cost of the relief, projected to reach £2 billion by 2028-29, as the reason for ensuring the incentive remains proportionate. Impact This revision significantly alters the net proceeds for business owners pursuing an EOT exit strategy, with the effective tax rate increasing from nil to 12% on the full gain. While employee ownership remains government-supported, the financial incentive for the vendor is materially lower, necessitating a recalibration of business valuations and personal financial planning objectives. Planning opportunities For future planning, the EOT remains a viable succession option, but careful modelling of the reduced tax benefit is essential. Vendors will now incur a substantial CGT liability, and due to the immediate effect, existing plans and alternate exit strategies must be considered. Other notable announcements A number of other changes or proposals were announced in the Budget that will either come into force in the future or will be open for consultation. Here, we have gathered some of note. Lifetime ISA modernisation. The government is looking to replace the existing ‘Lifetime ISA’ (£4,000 allowance to support those buying a first home) with a simpler version. A consultation will be published in early 2026. Combating tax evasion. The UK will be looking to combat tax evasion through the automatic exchange of information on real estate from 2029/2030. Excluded Property Trusts established before 30 October 2024 will benefit from a £5 million cap on periodic and exit charges, with the cap being backdated to 6 April 2025. CGT for protected cell companies: Further changes to non-UK resident CGT will take effect from 6 April 2026 that will impact Protected Cell Companies (PCCs), although further details are not yet available. Share-for-share exchanges and reorganisations can largely be undertaken in a tax-neutral way, which provides opportunity for further planning. With immediate effect, anti-avoidance provisions will apply where the main purpose (or one of the main purposes) is to secure a tax advantage that they would not ordinarily have been entitled to. Post-departure trade profits. There is currently no charge to tax if a distribution or dividend is made from ‘post departure trade profits’ (profits that accrue to the company after the individual left the UK, which are determined using a just and reasonable basis). Post-departure trade profits will be brought within the scope of the temporary non-resident rules from 6 April 2026, resulting in dividends payable whilst non-UK tax resident being chargeable to tax in the UK. Information provided by RBC Brewin Dolphin. T he UK economy Commenting on the outlook for the UK economy, Guy Foster, chief strategist at RBC Brewin Dolphin, said: “There are always political and economic stakeholders to be managed when releasing a Budget. The latter, including the Office for Budget Responsibility (OBR) and the financial markets, seem to have been appeased, however it typically takes longer to assess the former. “It was well known that the Chancellor would need to cut spending or raise taxes because changes to the OBR’s growth forecasts meant that she was no longer on track to meet her fiscal rules. In response, she has undertaken to increase borrowing in the near-term, while raising the tax burden later. “The bulk of the delayed pain will come from keeping tax thresholds frozen, allowing more taxpayers to drift into higher tax brackets as their wages rise. Its proponents will argue that the burden of this Budget lands on those with the broadest shoulders, but freezing thresholds increases the number of broad-shouldered individuals (if defined as those paying higher rate tax) from around 8% of the adult population in 2020 to 16% now. “Investors had been braced for worse and seem to be breathing a sigh of relief in the hours after the release of the Budget. Bond yields, which ultimately determine the cost of new borrowing for the government, have fallen slightly. The pound is up and there isn’t any meaningful change in the outlook for interest rates. “One of the most eye-catching elements of the Budget is the high value council tax surcharge (HVCTS) or ‘mansion tax’. Just under 1% of homes nationally are estimated to be worth £2 million. At the margin, this will further diminish demand for higher value homes, but this was already weak in anticipation of such a policy. “The transactional costs associated with such properties – such as stamp duty, which would be £153,750 on a £2 million property – dwarf the surcharge. While those are one-offs and the surcharge is an ongoing cost, at an effective rate of no more than 0.15% even modest house prices gains would comfortably offset the charge. “Overall, however the good news is that the Chancellor has raised the margin by which she is meeting her fiscal rules, reducing the risk that further measures might be required in future budgets.” Looking ahead While this list of measures is not exhaustive, we have highlighted what we consider the main points impacting personal finances and investments. For more detail, speak to your appropriate professional adviser. [1] OBR Economic and Fiscal Outlook, November 2025 The value of investments, and any income from them, can fall and you may get back less than you invested. Investment values may increase or decrease as a result of currency fluctuations. Information is provided only as an example and is not a recommendation to pursue a particular strategy. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Information is provided only as an example and is not a recommendation to pursue a particular strategy. If you would like to know more I am available to answer your questions, please contact me and we can discuss your specific needs.

Can you believe it is already May and we have now been under restrictive movement guidelines for 5 weeks? I do hope everyone is keeping safe and is well, weathering this strange time. More news will be coming from the government in a week or so as to whether this current guideline continues or relaxes a little, but this week we have started to see a little bit of good news in the market that I was keen to share with you. Brewin Dolphin has summed it up brilliantly, so it just seemed sensible to share the document they have released. If you have any questions abut how this affects your investments and pension, then please just get in touch and I'll be happy to talk!

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