Euan Fernie

It may in part have been a consequence of some heavy trailing, but there were no major surprises in the Chancellor’s first Budget and its measures – as they related to personal taxation – were, overall, probably better than some had feared.

Changes in areas such as Capital Gains Tax (CGT) and Inheritance Tax (IHT) were certainly well mooted in advance as means for the Chancellor to realise tax rises of – it now transpires – £40 billion.

And there are some interesting points to ponder around the details of those measures, not least as they relate to personal taxes.

The potential consequences of the reduction in IHT relief from 100% to 50% for assets over £1 million will certainly merit greater scrutiny. What does it mean, for example, for lifetime transfers: are they still deemed to be Potentially Exempt Transfers (PETs), or will tax become payable? It may prompt a change of approach in the way businesses are passed on, with some owners perhaps encouraged to sell the enterprise – rather than simply pass it on – to realise more liquidity on death. Insurance may also become a more prominent consideration in terms of longer-term planning.

The rate changes in CGT – from 10% to 18% at the lower rate and from 20% to 24% at the higher rate – are not as steep as had been anticipated in some quarters and certainly more manageable for clients than might have been the case. The retention of Business Asset Disposal Relief (BADR), albeit with some tweaks, is of course helpful.
There was good news on some fronts where the Government had perhaps tested the water with advance suggestions of possible change. Pension tax relief was one such area, but in the end it was untouched by the Budget.

Income Tax and National Insurance thresholds will meantime remain frozen – very much a choice made by the Chancellor, while referencing it as a policy of the previous Government – before being uprated in line with inflation from 2028/29.

It was certainly a meaty, comprehensive announcement – one which certainly sets a clear direction of travel for this new Government and its economic strategy – and I sense a certain degree of positivity around it.

The announcement itself marks only the start of the hard work for accountants, however.

What’s required now is scrutiny of the details behind the spin and the headlines to assess precisely what they mean for private clients.

Euan Fernie is a partner at MHA, based at its Edinburgh office