A very warm welcome to Talkabout, the Webcast Programme from Saffery Champness. I am Keith Aitken and I am joined today by Tim Gregory, Partner in the Saffery Champness Private Wealth Group, to talk about the implications of a 2009 Budget conceived to mitigate some of the gravest economic prospects in living memory.

Let us start with that headline story about the top-rate going up to 50p.

Hello again Keith, nice to speak to you once more. Yes top-rate of 50% for the people with the highest levels of income. It was expected to 45% that is what was announced in the Pre-Budget Report last year but the economic situation has obviously led to the Chancellor increasing that to 50%. That is really pip-squeaking as far as very high earners are concerned and there are the equivalent changes for trusts as well. It does not stop there, there is also the scrapping of Personal Allowances for people who are in that situation too, so it sounds as though there is a lot of extra tax that are going to be paid by these people and indeed Trustees and that is obviously the case for those people; but the fact is that the total amount of tax that is going to be raised from that pales into insignificance in comparison to the tax that we raise through increases and taxes on cigarettes and other forms of tobacco, on alcohol, fuel and indeed of course the re-introduction of a 17½% VAT rate after Christmas, so we actually are going to see far more raised from the general population as compared to the very highest earners.

There is of course a double whammy is there not for top earners in terms of the tax reliefs and pensions?

That is right. There is going to be further restrictions on tax reliefs for pension contributions. You might expect that that restriction is going to be from the 50% rate to the 40% rate, so people just cannot benefit more from the additional top-rate of tax, but in fact the restriction is going to be all the way down to basic rate and that is effective from 5 April 2011, although there are special rules to prevent people from putting in very large contributions between now and then. Unfortunately though, the special rules that do apply in that period are not going to benefit people who own their own business. For example people who are in that situation will have income levels that increase and fall from one year to the other and so the fact that people can preserve regular contributions going in to their pension funds is not going to be very helpful to those sorts of people who have big contributions in a good year and much lower contributions in a poor year and clearly we will have seen some very poor years for business owners in most recent times.

If it has become less attractive to put money into pensions, people are going to look elsewhere are they not. Where about might they look - might they look to property?

They might look to property. Property as we know is very depressed in value at the moment in comparison to a couple of years ago, may have further to fall we do not know, but there are indeed a couple of changes that are to be introduced into the Budget that might make property more attractive. There is the extension of the Stamp Duty/Land Tax holiday for properties that have a value of less than £175,000, that makes those sorts of properties attractive and clearly they are attractive not just to people who are buying that as their very own home but for people who want to invest in that kind of a property as a buy-to-let. The other point is an extension of Agricultural Property Relief to land that is held in the European Economic Area.

Less helpful I think are the changes in tax relief for holiday homes?

That is right, although it is not taking affect immediately. What is going to happen is that at least most of the special tax rules for furnished holiday lets are going to be withdrawn from 5 April 2010, there is some question mark over whether Business Property Relief might be withdrawn as well that has not been specified, but certainly it would appear that everything else is going to be withdrawn. However, in the meantime until 5 April 2010, the special rules are going to be extended to furnished holiday properties that are, again in the European Economic Area, so there is an opportunity there for people who already own such properties outside the UK perhaps to be able to benefit from furnished holiday lettings tax reliefs and allowances for the remaining 11 months of this year.

There is the usual promise Tim is there not to clampdown on tax avoidance loopholes, although this time there has been quite an ambitious figure predominantly, he is looking to save a billion pounds over three years is it not? Talk to me a little about that but also there is a much tougher clampdown on evasion is there not, there is going to be naming and shaming – what is the implication of that likely to be?

Yes that is right, there is going to be naming and shaming. The taxman is going to be allowed to publish the names of people who have deliberately understated their tax liabilities by £25k or more and that obviously is designed to prevent people from seeking to do that, it will be interesting how they define the word ‘deliberately’ and there is also an announcement of a new offshore income disclosure facility which will allow people to come clean on their offshore income, whether that will be tied up with the naming and shaming or not I guess that cannot be the case otherwise it would really put people off making those disclosures.

For people who have companies there were a number of things to try to help them through the crises, changes in rules on the carry back of losses, changed rules on Capital Allowances, is that stuff significant do you think?

The carry back of losses will be very significant for some companies, unfortunately though it is unlikely to be beneficial for several companies because of the way in which it is going to work. What companies can do in the normal course of business is carry back their losses to the previous year, what is now being announced today can also carry them back to the extent of £50k to be spread across the previous two years. Now there was already an additional carry back ability announced in the Pre-Budget Report and so to the extent that people have already used that they will actually find that being able to carry back to a previous year now, will only take them back to a year that they have already used because of the previous arrangements, so there will be some companies that will benefit from it and some companies that will not, that will principally depend on their financial year end.

We have talked already about the changes in pensions; let us look at some of the other things that have changed for people who have got money to save. The eye-catching one is the cash limit up on ISAs - how significant is that?

Well it is very significant for people who are over 50. Interesting to see that the Government is very keen to discriminate on the basis of age.

Is this the first time that they have done that, is that right?

I think that it is. People who are over 50 are going to have an increase in their ISA limit to £10,200 for this tax year, although interestingly only from October this year and not quite sure the relevance of that date; and everyone else who is under 50 will have that ISA limit increased to £10,200 from next tax year. In addition to that there is a lot of other bits and pieces for people who have savings and investments for example, there is the introduction of 10% tax credit on foreign dividends where the foreign company is held to the extent of more than 10%, people were already getting that 10% tax credit where they held less than that 10%, but that has now created a level playing field for larger holdings and there is also the introduction of tax transparency for offshore funds, so where you might receive what is termed to be a dividend, if the underlying income is actually more than interest in nature then you will be taxed as if you had just received interest direct, so as if the fund did not exist.

There are also some changed rules for Enterprise Investment Schemes are they not?

That is right yes. There is a meeting of conditions on Enterprise Investment Schemes and Venture Capital Trusts, those are principally to make these kind of schemes more attractive to people.

I think the regime for non-domiciliaries have also changed is it not?

That is right, only one change this time but a beneficial one for once. The £30k charge that has to be paid by non-domiciliaries who want to have the remittance basis for their non-UK income, can actually be used to represent the tax that can actually be reclaimed by charity if that individual is making donations under gift aid and so that gives an interesting opportunity for people to reduce the impact of their £30k charge.

We often say Tim that these are complex matters and people should get the best advice they can, but it does strike me that the stakes has got a whole lot bigger for people who need that kind of advice have they not?

They have absolutely, they seem to get ever more complicated and as ever it is always sensible if you are looking to change things or indeed to protect what you have got, you should always be seeking professional advice.

That was Tim Gregory, Partner in the Saffery Champness Private Wealth Group. We will be back soon to talk some more about a financial landscape that is changing as never before, do please join us for that.