After the shock and awe “Pensions Revolution” that took the industry by surprise in the last Budget and the accompanying crowding-pleasing hike in the Isa allowance, expectations of further radical changes to savings and investment schemes in this year’s Autumn Statement were frankly low.
Yes, there was the confirmation of the scrapping of death duties on pensions, but that particular rabbit was pulled out of the Chancellor’s hat in September as a headline grabber at the Tory conference.
With that in mind, the mood music of this Autumn Statement was less about giveaways and more about messaging that the economy is healing but don’t make the mistake of letting the other lot back in. Spending cuts, reducing the deficit, help for small businesses and cracking down on tax avoidance were the order of the day.
Yet pleasingly we did get thrown a small treat with the announcement that, with immediate effect, Isas can be inherited by a surviving spouse or civil partner with their tax benefits remaining intact. This was a welcome piece of “unfinished business” from the Chancellor.
I’ve long believed its unfair that a couple save together out of family (and taxed) income, perhaps living off the proceeds of their Isa savings together, yet following the death of a partner the tax man gets to sink his teeth into some of those savings while biding his time for the eventual main feast of inheritance tax.
Given the radical - almost too good to be true - changes that will enable pensions to be inherited tax-free, it was clearly the right time to provide at least a small fillip to those who might inherit Isa assets too.
Arguably, he should have gone much further and allowed Isas to be outside of the scope of an estate for IHT purposes entirely, rather than just transferable to a surviving spouse. It’s daft that older investors find themselves needing to switch their Isas assets into high-risk AIM shares if they want to mitigate an IHT liability.
Alongside this came the further news that “from 6 April 2015, surviving spouses will be able to invest as much into their own Isa for their financial future and enjoy the tax advantages they previously shared”.
This will need further clarification as it isn’t clear whether the level of extra allowance will be fixed at the level of the last contribution made by a deceased partner or whether they will simply get two full allowances each year, or for how long, but it is progress of sorts.
Finally, no Budget or Autumn Statement would be complete without some tinkering to VCTs and EIS. Today this took the form of an intention “exclude all companies substantially benefiting from other government support for the generation of renewable energy from also benefiting from tax-advantaged venture capital schemes, with the exception of community energy generation undertaken by qualifying organisations”.
That reads as a general catch-all for excluding certain companies as eligible VCT and EIS investments that weren’t captured by the exclusion of businesses in receipt of subsidies under the Renewable Obligation Certificates and Renewable Heat Incentive schemes in the last Finance Act. HMRC are essentially saying, tax incentives are for risk-taking. Fair enough.
