OpinionApr 6 2016

Arise and shine!

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Even my own balcony pots overlooking the vibrant River Thames are awash with colour. Uplifting. Sunflower seeds have just been potted up. Geraniums next. Percy Thrower would be impressed.

It all gives me a spring in my step, like a newborn lamb, as I scurry to work with deadlines to meet and editors to both please and appease.

The start of the cricket season is even just around the corner (much to my delight, I managed to get two tickets in the ballot for the Lords Test match against Pakistan in June). It will be summer before we know where we are – inside or outside the European Union.

April is also a good time, I believe, for all IFAs to wear a smile. Why? Of course, it is a result of ‘out’ with the old tax year and ‘in’ with the new.

’Tis the season to show your prowess and demonstrate to the country that there is nothing more financially uplifting than to benefit from a spot of quality financial planning.

There are tax changes to get to grips with and investment and savings portfolios to tinker with. In other words, clients to please with your intimate knowledge of the intimidatory (perplexing) tax and savings landscapes. Guidance? Forget it. Not a patch on professional financial advice garnered over a lifetime of advising.

This new tax year, the changes prompted by recent Budgets and Autumn Statements (not just the last Budget) are more numerous than usual given George Osborne’s tendency to both meddle and surprise.

This new tax year, the changes prompted by recent Budgets and Autumn Statements are more numerous than usual

There is the introduction of the National Living Wage of £7.20 for employees aged 25 or over, a new single-tier state pension of up to £155.65 a week, a higher tax-free personal allowance of £11,000 and a new higher rate tax threshold of £43,000.

But it is in the savings, investment and pension spheres where the scope for advisers to make a positive difference is greatest. Change afoot at every twist and turn.

Although the Chancellor of the Exchequer stepped back from a radical shake up of tax relief on pension contributions, the 2016/2017 tax year still brings in restrictions for many pension investors.

Additional rate taxpayers are seeing their ability to fund a pension curtailed by a reduction in the amount they can contribute – in some cases their maximum annual contributions will fall from £40,000 to £10,000.

These taxpayers (I am not one) will want advice on where else to invest besides a pension. Individual Savings Accounts? Maybe, although I imagine they will already be investing close to their annual limit of £15,240.

Buy-to-let? Some will be tempted, although changes between now and 2020 in the way rental income is taxed will surely turn many landlords’ portfolios from profit-making to loss-draining. And that is all without the further crackdown on buy-to-let lending that Mr Osborne has warned us is coming.

Venture capital trusts? Enterprise Investment Schemes? Yes, although the generous tax breaks are more than offset by the risks.

There is then the further shrinking of the pension lifetime allowance from £1.25m to £1m. Without access to financial advice, this will catch out many people, resulting in horrible tax charges applied to fund surpluses.

Most people, especially those with some pension built up on a defined benefit basis, simply have no idea where they stand with regards to the £1m allowance. All a bit of a mess really, but then, when have pensions not resembled anything but a goulash of bewildering rules and regulations.

In addition, 6 April sees the introduction of the new personal savings allowance – £1,000 a tax year of tax-free savings interest for basic rate taxpayers, £500 for higher rate taxpayers and of course, the square root of nothing for additional rate taxpayers (I am beginning to feel a bit sorry for this band of taxpayers).

For couples, savings may need to be rearranged to ensure the personal savings allowances are maximised. A job ready-made for a financial adviser.

There are sweeping changes to the way dividend income is taxed. Everyone will now enjoy £5,000 of tax-free dividend income. Any income above this cap will be taxed at 7.5 per cent for basic rate taxpayers, 32.5 per cent for higher rate taxpayers and 38.1 per cent for additional rate taxpayers.

Again, couples should be looking to juggle their investments to ensure any dividend income is shared between them as tax-efficiently as possible.

Capital gains tax is changing at the same time, with higher and additional rate taxpayers paying just 20 per cent tax on any capital gains above the annual exemption of £11,100 – as opposed to 28 per cent in the tax year just ended. Basic rate taxpayers have seen the tax charge drop from 18 per cent to 10 per cent.

These changes mean capital gains tax in Britain is among the lowest levied across Europe – although they do not apply to capital gains made from the sale of second homes. For landlords, the older, higher tax rates will still apply.

So, a lot of change to deal with – and that is without mentioning the future introduction of Lifetime Isas in April next year for the under 40s (if only I could roll back the years), the higher £20,000 annual Isa allowance and the probable creation of a market in second-hand annuities.

Lots of scope, I would say, for potential investor confusion. But also, lots of opportunity for you advisers to show your financial mettle – with existing and new clients.

So good luck. Bon chance. Hope springs eternal and all that.

Jeff Prestridge is personal finance editor of the Mail on Sunday