Tax planning is a key feature of advisers’ propositions. It’s a major value-add for clients and helps justify advisers’ annual charging business model – as we discuss in the latest report from Platforum UK Financial Advisers: Market Overview. This looks set to continue as a prolonged period of higher tax appears likely. Unlike purely investment-based services, it is hard to commoditise tax planning which mostly needs to be bespoke.
Determining how clients should draw income from their investments should already be a core annual service for decumulating clients; tax increases simply increase the importance of such planning.
The new 1.25% Health and Social Care Levy and increase in dividend tax will become permanent features of our tax system and they might become even more important in time. The government could extend the HSCL to such other areas as capital gains or inheritances; the tax rate might possibly be increased because of the sheer size of the fiscal hole.
Practical effects could be to stimulate the demand for life assurance investment bonds – especially for higher and additional rate taxpayers with general investment accounts. They also make VCTs look more attractive, because of their tax-free income. Pension contributions through salary sacrifice look even more attractive compared with individual pension contributions.
What’s more, advisers could find they are at last able to get their teeth into planning for clients’ future long-term care. The government is keen on new insurance products for this market and the already burgeoning equity release market could get an extra boost.
The advice sector looks set to thrive, helping customers navigate a more complex tax landscape, providing reassurance on long-term care and ultimately offering more certainty around inheritance.
We recently published our UK Financial Advisers: Market Overview report, for more information, please get in touch.