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Great Financial Ideas Newsletter - December 2012

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Dear [FIRSTNAME]

You could hardly have missed the widespread news last week as Chancellor George Osborne unveiled his 2012 Autumn Statement, setting out the coalition's financial plans until 2017/18.

As we’d all been led to expect, it was pretty depressing news on the economy which seems to be stubbornly resistant to staying on the road to recovery.

Estimates for Britain's economic growth have dropped sharply. The Office for Budget Responsibility (OBR) now expects our economy to shrink by 0.1% this year, instead of growing by 0.8%. For 2012, the growth forecast has been cut to 1.2% from 2%, with further falls in later years.

Commentators are citing this as the weakest post-recession performance in Britain's postwar history. And the knock-on effect could eventually see the UK lose its 'AAA' credit rating and an end to the country’s ability to borrow at very low rates of interest.

But elsewhere, commentators were heralding the autumn statement as ‘business friendly’. Certainly a massive investment will be made into the construction sector. But has the Chancellor done enough to keep us from flat-lining and bring us back to good health in the future?

Let’s take a look at some of the key announcements that have particular resonance for the small business owner.

Tax Planning
Somewhat surprisingly the Autumn statement did not affect any of the tax planning structures we currently have available. However this is probably somewhat premature as the Spring Budget 2013 is expected to change the tax landscape somewhat. This leaves a window between now and January 2013 when tax planning can be implemented before the Spring budget.

Investments
The Chancellor is proposing allowing investors to include AIM stocks inside tax-free ISAs. If passed, this would let investors buy shares in small companies traded on London's Alternative Investment Market inside Individual Savings Accounts bringing further investment to business.

There is an element of caution, however, from the perspective of the investor as this will be risky and typically more the domain of higher-net-worth individuals with highly diversified portfolios.

Fuel
Plans to scrap a 3p-a-litre rise in fuel duty scheduled for January was welcome news to businesses and consumers alike. With little slack to absorb some or all of the costs themselves many firms would have been left with no choice but to raise prices and risk alienating customers in an already highly competitive marketplace.

Pensions
Although there’s a small increase on the state pension, some of those planning for their personal pensions have taken a hit. With effect from April 2014, the lifetime limit for the size of pension pots will reduce from £1.5 million to £1.25 million although this only affects the higher earning 1% to 2% of the population. Also, the yearly limit for tax-free contributions will fall by a fifth from £50,000 to £40,000.

But at least these changes can, with adjustment now, be accommodated in any long term pension planning. As ever pensions continue to be an attractive and tax-efficient way to save for our retirement and my mantra continues to be that small business owners need to act now to ensure adequate pension provision.

For those with pensions in draw down the maximum income limit will increase from 100% to 120% of the GAD annuity rate. This means that those in draw down suffering a fall in income will ultimately be able to see an increase in income. However draft legislation is not expected until January 2014 in order to allow time for consultation.

Andy Parker
Chartered Accountant, Birmingham


Share your experiences
Add your own comments to any of the blogs that really strike a chord via the Parker website.

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The pension pot around which you’ve been planning your finances for old age is likely to look a lot less healthy if inflation-adjusted illustration proposals by the FSA come into effect. Read more...
 
For advice on all accountancy and financial issues contact Parker Chartered Accountants and Financial Advisors on 0121 704 1354.


Regards

Andy Parker
Parker Chartered Accountants + Financial Advisors

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