Neil Jones, Technical Manager at Canada Life, had this to say following yesterday's Summer Budget:

“This is a Budget explicitly aimed at middle Britain but a big beneficiary will be the wealth management industry. There are lots of surprising changes that will impact the wealthy and keep their advisers busy, particularly those that advise high net worth individuals.

“With the headline announcement of an inheritance tax giveaway for middle England, the Chancellor has effectively robbed rich Uncle Peter to pay middle class Paul. The losers are higher income earners whose pension tax reliefs are being dramatically scaled back.

“The Exchequer will bank a ?1.5bn profit by raking in ?4.1bn from cutting pension tax relief, while it expects to pay out just ?2.6bn to pay for the family home IHT ‘giveaway’. And the money will start coming in straightway from the restrictions to pensions tax relief, while the Government won’t have to start paying for the IHT change until 2017. Those earning over ?150,000 will be seeking advice on tax efficient capital growth options from today and we expect offshore bonds to be popular options.

“There is also an IHT stealth tax hidden away in the small print. The nil rate band has been frozen for another three years to 2021. For those without access to the new main residence allowance – because they don’t have children or grandchildren, their assets aren’t in property or their estate is worth over ?2.35m – their IHT bill will rise in line with their asset growth.

“The fact is that the new IHT changes mean 6% of estates are liable for IHT, down just 2 percentage points from 8%. The Government is still forecasting a huge rise in both the number of estates with an IHT liability and in the value of receipts from the tax over the next six years. This means more people than ever need financial planning advice to protect their wealth and products that will help them to achieve this goal.

“Holders of onshore bonds look to benefit significantly from this budget because the fund tax is going down to 18% but policy holders will still get a 20% tax credit.

“Non-doms have also seen changes and financial advice will be even more important. Some will become deemed-domicile as soon as the changes are introduced.”

Here is a guide from Canada Life to the main changes in today’s summer budget:

Inheritance Tax (IHT)

• Nil rate band of ?325,000 frozen until the end of 2020/21 tax year.
• New transferrable main residence nil rate band being phased in; ?100,000 for 2017/18, ?125,000 for 2018/19, ?150,000 for 2019/2020 and ?175,000 for 2020/21.
- Available only to pass property onto direct descendants.
- Will be available to those who downsize property after today – who can pass on property and assets up to the value.
- This amount is tapered for those with estates worth ?2m or more; with no benefit above ?2.35m when fully implemented.
• Non-doms will now be deemed domicile after being resident in the UK for 15 out of 20 years.

Income Tax

• The basic personal allowance will increase to ?11,000 next April and then increase in line with the minimum wage.
• Higher rate tax will increase to ?43,000 from next April.

Pensions

• Introduction of a taper to the Annual Allowance for those with income, including their own and employer’s pension contributions, over ?150,000 from April 2016.
- For every ?2 of adjusted income over ?150,000, an individual’s Annual Allowance will be reduced by ?1, down to a minimum of ?10,000.
- Providers have to produce statement of contributions where an overpayment has been made. It will be difficult to determine as the charge is dependent on earnings, where some will not know their earnings, such as self-employed individuals, who submit details the following January after tax year end.
• A Green Paper will be issued with suggestions for reform, such as making pensions more like ISAs, such as moving from EET (exempt, exempt, taxed) to TEE (taxed, exempt, exempt).
• Government to actively monitor schemes utilising salary sacrifice and the effect on tax receipts.
• Plans for annuity purchases delayed until April 2017.
• Legislation to align pension input periods with the tax year and to protect any savings will be effective from 8 July 2015.
• Lifetime allowance will be linked to CPI from April 2018.

Capital Gains Tax (CGT)

• No change to personal capital gains tax.

Non-doms

• An end to the permanent non-dom status after a technical consultation.
- From April 2017, anybody who has been resident in the UK for more than 15 of the past 20 tax years will be deemed UK-domiciled for tax purposes.
- It will no longer be possible for somebody who is born in the UK to parents who are UK domiciled to claim non-domicile status if they leave but then return and take up residency in the UK.
• The government will legislate to ensure that, from April 2017, inheritance tax is payable on all UK residential property owned by non-domiciles, regardless of their residence status for tax purposes, including property held indirectly through an offshore structure. A full detailed consultation will follow later this year.

Dividend income

• From April 2016
- The government will abolish the Dividend Tax Credit from April 2016.
- A new Dividend Allowance of ?5,000 will be available in addition to the personal allowance and the forthcoming Personal Savings Allowance, and the savings income rate reduction introduced in April 2015.
- The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

National Insurance

• From April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance.
Buy to let landlords
• The government will restrict the higher rate tax relief on finance costs that landlords of residential property can get to the basic rate of income tax. The restriction will be phased in over 4 years, starting from April 2017.

Corporation tax

• The corporation tax rate will reduce from 20% to 19% in 2017 and 18% in 2020.