The tax environment is tough right now, and could get tougher still. Tax changes are difficult to predict with any degree of certainty, but reduced tax privileges could well be in the pipeline in the spring Budget.
FTA: What's your outlook on the tax-efficient investments market?
MC: Given the restriction on pensions for higher earners and the tax breaks available for high-net-worth clients, we believe that this market will develop.
Our current feeling is that in general the retail space for venture capital trusts is populated with lower quality offerings, with the better opportunities having been snapped up upstream from the retail space.
Rather than consolidation, we expect some higher quality originators will form strategic alliances with some of the more sophisticated wealth management companies.
FTA: Do you foresee a shift in the role crypto is playing in your clients' portfolios?
MC: We have been asked by numerous clients about the pros and cons of investing in cryptoassets, such as bitcoin. But cryptocurrencies are notoriously hard to regulate, and there is currently no protection for those who own them.
Some advisers may shy away altogether, but as a forward-thinking company it would be remiss of us to ignore crypto entirely.
We don’t engage directly in cryptoassets currently, due to extreme volatility and a lack of regulation, but we remain open-minded in the longer term, and our in-house investment team is keeping a finger on the proverbial pulse.
FTA: What concerns you most about tax policy as we move into the new tax year?
MC: The personal allowance and inheritance tax thresholds of £12,570 and £325,000 respectively have been frozen until April 2026, as has the lifetime allowance ceiling.
There are rumours that the latter could be reduced in future Budgets, with figures of £900,000 or £800,000 mooted.
Taken together with the upcoming national insurance rise and the current cost of living crisis that’s a fairly bitter taxation pill for consumers to swallow.
FTA: With that in mind, what do you expect from the spring statement?
MC: Tax announcements are notoriously difficult to predict – the ‘will they, won’t they’ national insurance saga is a case in point.
The chancellor must chart a course through choppy waters in his spring Budget. It’s a delicate balancing act.
On the one hand, the Treasury is seeking to claw back costs after an unprecedented period of pandemic-induced emergency government support.
On the other, there’s the dilemma of previous (and possible future) tax freezes or rises. Add rising interest rates and rocketing inflation into the mix and the collective squeeze on the consumer purse borders on the vice-like.
