Questions need to be answered

Tom HamTom Ham
Tom Ham | Supplied
Pension plans will need to be adjusted as the devil is in the detail, says Tom Ham, group CEO of Calton, on the UK Budget

The Chancellor has spoken. She pulled very few rabbits out of her hat that hadn’t already had their ears, noses and hindquarters checked. There is much to be pored over and parsed in the coming days as the Red Book detail meets industry experts. The devil will still be in the detail. That said, there remain significant immediate takeaways and some pressing questions.

On pensions, many of the most radical measures were floated out and then (thankfully) reeled back in. Reliefs on contributions remain intact. The tax-free lump sum has been neither scythed away nor whittled down. However, ending the exemption of private pension pots from Inheritance Tax (IHT), in place since 2015, will bring upheaval. The Treasury’s just-published consultation document suggests that this will raise £1.5bn once it is introduced in April 2027 and that it will affect around 8 per cent of estates each year.

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We will need to adjust the plans of those clients whose estate planning takes their pensions into account. It is possible that beneficiaries will be subject to income tax on withdrawals after IHT has been paid. It appears that the changes may apply equally to public and private pensions, DB and DC schemes respectively, so this may not drive a further wedge between the public and private sectors. A final small mercy for the government is that this isn’t horrendously complicated to explain to the public and it reaffirms the principle that pensions provide for retirement.

I have written previously in Scotsman Money about how close my sister in-law’s sheep farm and estate is to my heart. I would be untrue to myself not to share my deep concern that changes to Agricultural Property Relief will harm the sector. The new exemption of up to £1m means very little when you are talking about land and only the smallest holdings will be spared inheritance tax. Depending on valuation used (farming or renewables for instance) this may cause disproportionate tax charges.

Until we see the detail on this, it looks for now as if families may have to take the risk of lifetime transfer or find the money to pay IHT. Farmers view themselves as custodians of their land across generations. To me, at this juncture, it looks like we may be on track for greater nefarious consolidation in agriculture, where only the biggest operations survive. I hope that a consultation document will allay my fears.

When the dust has settled on this historic budget, I’d like you to reflect on the past months and think about how these rollercoaster months of speculation made you feel about your personal finances. If you work with a team already, I hope that your advisers were there to reassure you. I hope that found their expertise valuable and that they brought a useful perspective. Your long-term plan isn’t a dog that’s wagged by a fiscal tail. If you don’t have a plan, and if you’ve been putting off getting your affairs in order, now is the time.

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