Welcome to the Budget. I suppose we can say ‘it wasn’t as bad as it could have been’ (as inferred previously that perhaps the snowstorm of released rumours was designed to frighten everyone witless) but there were some very nasty things in there impacting many people.
I (nor independent commentators) don’t think she needed to raise so much money to splash on already bloated public services (without conditions or productivity offsets) and sorry but it was a business-negative Budget which won’t help the objective of encouraging business and overseas’ investors. She inherited a growing economy and a fair set of books (as bad as conditions from Covid, the Energy Crisis and Inflation, etc had made them) and recent sentiment demonstrated that the government had lost the ear of business and confidence generally. Tax will now be the highest level of our economic output on record.
There are some societal equalising things she didn’t do – which she could have – like cutting the basic IHT threshold or even introducing National Insurance on other forms of income than simply earnings. She hasn’t gone for Pension tax relief on investment nor tax on lump sums either, nor restrictions on ISAs, etc.
However, the main nasties are:-
* Inheritance Tax on Pension Funds (presently zero)
* 20% Inheritance Tax on qualifying business assets, agricultural assets and AIM shares (presently zero)
* Cap of only £1million allowance on Qualifying Business Assets and agricultural property (presently unlimited)
The swingeing anti-work change is the 9% cost increase in the National Insurance levy for employers to 15% and significantly the reduction in NI starting levels to only £5,000 from £9,100. The National Living Wage will increase to £12.21 next April too. I haven’t done the exact maths but adding-up all the on-charges and holidays etc, that will mean a cost of over £31,000 to the average employer for one full-time person, yes, £615pw.
At least the charge on Capital Gains has not been increased as much as feared, so still an attractive tax option for people. AIM shares rallied on the news and the FTSE250 rose whereas the FTSE100 fell. Sterling rose to start but Gilts then fell but expect interest rates to be cut by the Central Bank in its next meeting.
Overall – the ramifications of certain tax increases will manifest themselves down the line in unexpected ways. Indeed, I have said many times before but has the government allowed for the fact that public spending will rise to cover by far the biggest employer of ‘working people’ – the State… a Ponzi scheme if ever there was one.
Well, more tax-planning work for financial advisers I suppose and new schemes to be reviewed to consider how to mitigate tax liabilities… oddly enough, people don’t tend to like suffering excessive tax burdens or feckless State spending… fair taxes they suffer reluctantly but! More details on the Budget will be published as they are known.
Apologies too that the last missive suggested ISA allowances were £30,000 – not sure how that sneaked through the edits! Of course, I only placed it there to see how many of you were reading the eshots!
Chasing fame
I should add that Mr Felix Milton did us proud with an appearance on ‘The Chase’ on 21 October. He didn’t come away with any money but was the last man standing against the ‘Dark Destroyer’! Well done Felix.
Good news/bad news
So, Close Bros Plc suffered a negative court verdict but is going to appeal higher. However, it was enough to knock a quarter from the share price and further declines since and all the recovery enjoyed since the first announcement of compensation for car finance was made – impacting one or two other banks likewise, such as Lloyds.
The consequences could be severe if not over-turned in the Supreme High Court and the value of Close’s sale of its asset management business has been subsumed already. Is this a great buy for the more optimistic investor, at these levels as there will still be a good business through the other side? I think so. Worst-case estimates of the maximum compensation are far less than the recent asset sale raised alone for example. Lloyds has also taken a bath from the case, after otherwise excellent figures from the banking sector generally.
Good news? Eckoh agrees a bid from a Private Equity firm – one of our small AIM stocks and the price jumps 25%. They’re still buying a good business too cheaply.
St James’s Place
I read that SJP is embracing other forms of investments in the ‘alternative space’ for its investors and including embracing crypto currency. You’ll know my views on this non-existent thing unbacked by anything other than hype and confidence… however, in this context does it impact the confidence we may place in an institution which supports it I wonder?
And now…
What will the US election results do for the world economy, the US Dollar and stock prices? Let’s consider that the next time!
My best wishes
Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB
Chartered Wealth Manager
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers
