After the Budget: What could it mean for markets and your clients?

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Good morning, and welcome to our post-budget webinar for financial advisors.

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The Chancellor has delivered the 2026 autumn budget, and now the focus turns to

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what the announcements could mean for your clients and the conversations that you

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have with them. Today, we'll examine the tax changes, the economic and investment

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outlook, and the areas you may want to explore with clients as the details become

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more clear. We'll distinguish between the measures announced yesterday from

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existing policy and consider what the budget could mean for client portfolios and

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their plans for the future. Joining me are Rachel de Souza, tax partner at RSM.

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Hello. And she'll be talking obviously about the tax changes.

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And Daniel Casale, chief investment strategist at Evelyn Partners. Hello, Daniel.

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Hello.

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Who will be looking at the investment and macroeconomic picture.

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So thank you, both of you, for joining us.

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Delighted to be here.

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Now, we will spend most of the time discussing the announcements and the

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implications for IFA clients. But at the end, we will take your questions.

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So somewhere on the screen, there should be a QR code.

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So get your phone out, use it on the QR code, and follow the prompts to send

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your questions in. So those questions we will be taking at the end.

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So thank you, Rachel and Daniel. So I think this was a budget with the most

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announcement, most number of policy changes. Was it 90?

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98.

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98. Almost went for the centenary.

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So 98 policies, but if you look at the fiscal impact, the billions or

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millions, they were quite small. Okay? So we get the Red Book.

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We go through all the hundreds and hundreds of pages, particularly in tax.

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Yep.

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But let's just... Your first reaction.

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So budget, tax, it's your world, Rachel.

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Absolutely.

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What was your sort of first reaction?

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It's a something and nothing budget, really- Okay

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... from a tax perspective. As you say, huge number of policy announcements.

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In comparative terms, fairly little tax revenue raise.

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It was about five and a half billion, which is pretty minimal-

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Minimal

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... in government terms.

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Well, in contrast, the National Insurance contribution change raised 25 billion in

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one go.

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Exactly.

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In one go.

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So it's minimal.

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That's minimal.

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So it's minimal. So something and nothing.

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Of course, that means the ones that have changed, they are minimally focused.

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It's going to affect different communities of people, and those are the changes

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that we'll come on to talk to. But really, relatively quiet on the private client

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front. And to be honest with you, I think private clients will be thankful for that

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because they've had two years of extraordinary changes.

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Big, big significant changes. So I think in government speak, breathing space.

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The breathing space comes from private clients from actually not having to deal

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with an awful lot of change from this budget.

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Well, I would also argue it's breathing space for all the IFAs out there.

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Absolutely.

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Because they're not-

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That's what I mean. Yeah

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... they're not going to have to go through hundreds of pages of tax code.

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Indeed.

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Which, of course, you love to do.

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Thank you.

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So Daniel, what was your overall reading?

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Well, I'm looking at it from an economic and investment perspective.

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Okay.

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My punchline is to look to Washington rather than Westminster.

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Okay.

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Because let's face it, at the end of the day, the US economy dominates, US equity

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markets dominate, so does the US bond market.

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So when I'm looking at this, I'm looking at some of the stories that are coming out

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of the US. And of course, the one that's front and center is, of course, artificial

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intelligence, and that is dragging up all the other markets together, including the

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UK, because 80% of the sales of top-listed UK companies are derived globally.

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Then we look at the US bond market. We'll talk about that in a bit more detail, but

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that too is also driving gilt yields.

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We've seen a normalization in US Treasury yields, and that's driving up the cost of

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borrowing in the UK. There's a lot to go back to fiscal credibility there.

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So I think these are some of the key things that are affecting the UK.

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And also, we'll talk about how the US economy and implications in the Middle East,

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how they're driving up inflation through higher energy prices, also affects the UK.

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So for me, don't just look at the budget headlines.

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You need to keep an eye stateside, which is really look at what policy comes out of

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in Washington.

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But you've also described it as a no-dramas budget.

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And if you look at the market reaction, so sterling, borrowing, gilt markets,

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borrowing markets, and stock market. I mean, the bank stocks moved up, moved...

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Yeah.

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And house builders moved. But actually, it was all pretty muted. No dramas.

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Yeah. I mean, unlike an episode of "EastEnders", I would say that this really is a

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no-dramas budget. I haven't seen it since Grant Mitchell has left.

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But I would say it's definitely a no-dramas budget, as you were saying there as

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well, Rachel. What I mean by that, we haven't got the Rachel Reeves last two

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budgets with the big tax and spending coming through.

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Or dare I say, we haven't got the Liz Truss/Kwasi Kwarteng budget in the 2022

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either. So we should-

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There are some things to be grateful for

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... Yes, there'll certainly be some things to be grateful there.

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But there were certainly no dramas in this budget, but the dramas are just going

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to be put off into 2027.

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Yeah. So the big decisions- Right

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... which is cuts in welfare spending-

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Yes

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... that's going to happen in the Spending Review or maybe in spring or autumn if

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they delay it. And what we don't know is with those Labour back benches, are they

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going to approve the welfare cuts? Keir Starmer tried that with Rachel Reeves.

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Look what happened there. So I think that's one key drama point.

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And the second key drama point is, it's now been talked about a lot, is do we have

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a snap election in the UK?

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Andy Burnham says nothing for 12 months-

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Let's just talk about that

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... according to the headlines today.

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There's three reasons why we need to look at this.

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Number one is that if you look at the opinion polls, Labour, we've got the Burnham

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bounce, and they're up to 35% at the moment.

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So that could be enough to get them a majority in Parliament.

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We see on the right, they're split between the Reform and the Tories.

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And also, the Greens have fallen quite sharply.

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So if you look at it from a gambling perspective for Andy Burnham, if you want to

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go with the opinion polls quite high, it looks a good situation.

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Secondly, you can look at what Andy Burnham wants to do.

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He's constrained by the 2024 Labour Party manifesto-

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Absolutely

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... which has not raised the big three taxes, National Insurance, income tax, and

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VAT. So if he really wants to go with his grand plans for the 10 years, he probably

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has to go to the polls again. And I think the third thing is looking at

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departmental spending cuts. There, we've got 2.4% increase this year, and it's

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going to go down to 0.5%, which is soon after I talked about this in the Sunday

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Times. So on what planet do we think that they can really cut the departmental

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spending in an election year that's scheduled for 2029?

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So cue drama and cue the "EastEnders" drumbeat.

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You don't have to do any "EastEnders" analogy, Rachel.

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Please, please, please don't. What announced measures are you going to be

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talking about with your clients in terms of planning?

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So I think it's an interesting question about what the announced measures are.

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It's also what wasn't announced. Because of course, in the run-up to the budget,

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the focus was on capital gains tax.

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Particularly, people were worried about, is the rate going to rise?

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And therefore, what do they do? Do they sell their investments, or do they hold, or

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what have you? So we now know, no change to capital gains tax, so that gives an

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element of stability for people with their portfolios. So that's one thing.

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We've then got to say, well, what did we...

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What are the rises from a tax perspective?

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And the reality is, if it's extra percentage points on net rental

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income, it's extra percentage points on investment income, i.e. interest income.

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And the reality is, if you're holding a buy-to-let portfolio, well, what are you

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going to do?

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There's not a lot of planning. You have to pay it, right?

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Yeah. Exactly. We'll come on to talk some options later.

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But, and again, with the cash holdings,

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I defer to my sort of investment colleagues on whether you should hold cash or not.

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But if for whatever reason you need to hold cash-

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You've got a lot of choice

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... you haven't got a lot of choice.

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So then you're then looking at, are you making use of the other

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things that are available?

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Available, which is all the tax planning.

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Yeah. Okay. So for advisors and their clients, obviously, a

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big focus on pensions-

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Yeah

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... and retirement pensions, and retirement planning, because a pension could be

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one of the largest assets that a client would own.

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Now, unlike previous budgets, this was really quite-

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Yeah

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... light on changes to pensions. We've had some huge changes to pensions-

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Yeah

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... under Osborne, under Rachel Reeves. But we have a little change.

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It's a bit of an admin change, and it's the two-year rule.

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Yeah.

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So first of all, it must be a bit of a relief.

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Yeah.

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The pension industry is being-

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Yeah, I'm sure everyone's relieved about that.

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Explain to me the two-year rule then, and why it's important.

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So, at the moment, if somebody dies under the age of 75, the person

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that inherits that pension, when they take those monies out of the pension, they

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don't pay any income tax. So, it's a really big benefit, but obviously you've got

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to die under the age of 75 to get it. Now, that money can come out as a lump sum or

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as some kind of pension drawdown. But it has to have started, if it's a

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drawdown or if it's a lump sum, you have to have taken it-

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Mm-hmm

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... within two years. And it's two years of when the pension administrator either

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knew or should have known that the member has died.

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If you're one day over that two-year period, out.

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You do not get that income tax, tax-free exit.

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So, the change, which is effectively, immediately, is getting rid of the two years.

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Mm.

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It's just an admin thing. There's no terribly good reason I can see for having it

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there, and it has now gone. I suspect it has gone thinking

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forward to what's coming in in April, when pensions come within the IHT

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net, because actually, when you're starting to get people dying and they've got

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their pensions to think about as well, there's a lot more bureaucracy, admin,

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family conversations that are going to need to be had as to how do you allocate the

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funds that are in the pension between those who are eligible to benefit.

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Who's going to pay the tax on it? Is it coming out of the pension?

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Is it coming out of the free estate?

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And therefore, it could easily take two years to sort that out.

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Well, to be honest, going through the whole process takes-

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It, yeah

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... more than two years, right?

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When someone dies. So, let's talk a little bit about...

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So that was the only change then?

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Yeah.

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Pretty much. Okay.

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And it's a good change.

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It's a good change, right. So possibly the change to do with the fact that pensions

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are coming into IHT. Right. So, what about the pension tax-free cash, the

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over 250 grand. How much? The

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268 or something like

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that? 268. Something like that. Roughly, yeah.

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Okay. That didn't change.

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No.

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And people have been forecasting that was going to change or possibly predicting.

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That's not changed.

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No.

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But how... So that's good news.

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Yeah, yeah.

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So how does that impact the money purchase annual allowance?

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So-

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So, no. So the point here is what we were seeing in the run-up to the budget-

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Yeah

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... again, because people are worried that that amount that you can take as the

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tax-free element was going to be reduced.

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Mm-hmm.

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And therefore, people were accessing their pension commencement lump sum.

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And that's been going on since we've had this government. Yeah.

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Exactly. And effectively what happens is you take that tax-free amount, but you've

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designated,

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out of 100, you take 25, and 75 is designated.

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Yeah.

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So that means it's gone into your drawdown pension.

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Yeah, and you pay tax on that.

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And when you take that out. But you don't need to actually start drawing from that

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amount that's designated. So just taking the PCLS does not mean you get into this

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money purchase annual allowance.

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But if you start to draw from the drawdown amount- Mm

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... you do. And what that means is it impacts the amount of tax-free savings,

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or sorry, tax efficient savings you can put into your pension.

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So it then, as soon as you start that draw, you're limited to £10,000 of

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tax-relievable contributions on an annual basis.

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So it does make, for those people who have significant earnings, that can make a

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really big difference to what you can keep putting in.

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And you found in your business-

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Yeah

242

00:12:50,052 --> 00:12:53,054

... that there have been people who have retired and done those things- Yeah

243

00:12:53,351 --> 00:12:55,662

... and then decided, "Actually, I want to go back to work," and then at that

244

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point-

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So, people do, of course. So some people, of course, nowadays, they will retire at

246

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55 or earlier. They might take out their tax-free amount.

247

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They might get a bit bored. So they go back into, they either go consulting or they

248

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might go back into employment, and then they think, "Oh, well, I'll just carry on

249

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replenishing my pension." Which now, what if they've drawn on

250

00:13:20,382 --> 00:13:25,242

their actual pension amount, they are restricted to this 10,000.

251

00:13:25,572 --> 00:13:31,212

So it's, I know IFAs will be all over this, but it's just a reminder for their

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00:13:31,333 --> 00:13:36,492

clients that that money purchase annual allowance still exists and care needs to be

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taken.

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00:13:38,502 --> 00:13:44,022

What about the interaction between pension changes and the tax existing

255

00:13:44,083 --> 00:13:47,202

inheritance tax rules or reliefs?

256

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So again, what I'm finding is that

257

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people have not really connected the dots.

258

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They've heard there's a change, but they haven't really internalized it in their

259

00:13:59,803 --> 00:14:05,113

minds. So what it effectively means is, if we take a little sort of example, if

260

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I've got £1,000 in my pension plan and I've died, so that

261

00:14:10,542 --> 00:14:15,792

£1,000 goes into my IHT estate. And let's assume we've got other assets, so we

262

00:14:15,822 --> 00:14:18,042

haven't got the nil rate band to consider.

263

00:14:18,882 --> 00:14:23,292

So £400 gets paid in inheritance tax on that £1,000.

264

00:14:23,592 --> 00:14:26,623

That leaves me with £600 in the pot.

265

00:14:27,672 --> 00:14:32,922

My heirs, my nominated heirs or beneficiaries for this, will then obviously take it

266

00:14:33,042 --> 00:14:38,922

out. If I've died after the age of 75, they're going to pay income tax on what

267

00:14:38,983 --> 00:14:44,863

they take out. If those recipients are in the additional rate, they are

268

00:14:44,892 --> 00:14:49,873

going to pay £270 on that 600 that's left in the pot.

269

00:14:51,432 --> 00:14:53,322

Because that's the income tax rate on that.

270

00:14:53,742 --> 00:14:59,412

So the 270 plus the 400 IHT, that's an

271

00:14:59,592 --> 00:15:05,142

overall effective tax rate of 67% on that £1,000

272

00:15:06,012 --> 00:15:11,502

that was left in the pension pot. So this is where people may have not

273

00:15:12,282 --> 00:15:14,562

grasped the joining of the dots.

274

00:15:14,623 --> 00:15:17,142

And so the first thing is that's happening from April of next year.

275

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April of next

276

00:15:17,711 --> 00:15:18,252

year. It's not long.

277

00:15:18,312 --> 00:15:18,672

Correct.

278

00:15:18,702 --> 00:15:24,462

And the second thing is it forces advisors and their clients to think about

279

00:15:25,152 --> 00:15:27,102

wealth planning through generations.

280

00:15:27,132 --> 00:15:27,373

Right.

281

00:15:27,972 --> 00:15:33,911

Because the overall tax implications are dependent on the income tax bands of the

282

00:15:34,422 --> 00:15:34,873

heirs.

283

00:15:34,932 --> 00:15:36,132

Yeah. Yes.

284

00:15:36,192 --> 00:15:40,182

So you've got to work through. It's not just like, it really is sort of like a, not

285

00:15:40,242 --> 00:15:42,072

quite a family office, but it is.

286

00:15:42,162 --> 00:15:47,292

You do. Well, so families now need to have a slightly different approach when

287

00:15:47,322 --> 00:15:52,812

they're thinking about their pension in terms of their later life and retirement

288

00:15:52,902 --> 00:15:58,452

planning. Because up till now, because the pension was outside the inheritance tax

289

00:15:58,512 --> 00:16:04,212

net, if you had other assets as well, you would generally put that pension to

290

00:16:04,333 --> 00:16:09,312

one side for that to be inherited by your heirs, because it wasn't going to be

291

00:16:09,342 --> 00:16:13,303

subject to inheritance tax. Now the equation has changed.

292

00:16:13,722 --> 00:16:19,062

So, and because of that combined inheritance tax and income tax impact,

293

00:16:19,873 --> 00:16:24,972

advisors are talking to clients about, well, do we actually now start to draw on

294

00:16:25,032 --> 00:16:28,123

that pension rather than leave it there?

295

00:16:28,632 --> 00:16:34,512

So yes, you're creating an income tax charge for yourself by drawing on it, and

296

00:16:34,572 --> 00:16:38,892

then, well, what do we do with that? Do we gift it?

297

00:16:39,102 --> 00:16:39,192

Mm.

298

00:16:39,252 --> 00:16:43,873

Do we gift the money we've drawn because we don't need it to the next generation?

299

00:16:44,292 --> 00:16:48,882

So the seven-year clock for inheritance tax purposes still exists.

300

00:16:48,912 --> 00:16:49,422

Didn't change.

301

00:16:50,022 --> 00:16:53,623

And we've also got the gifts out of income exception.

302

00:16:54,012 --> 00:16:54,042

Yes.

303

00:16:54,102 --> 00:16:57,702

Now, this is a really interesting, it's a really little interesting interplay here.

304

00:16:58,242 --> 00:17:02,442

If you're taking your pension commencement lump sum, your tax-free amount, at the

305

00:17:02,532 --> 00:17:07,992

moment, the best advice is that does not form income for these purposes.

306

00:17:08,412 --> 00:17:10,692

So if you're then passing that on-

307

00:17:10,932 --> 00:17:11,264

That is IHT

308

00:17:11,322 --> 00:17:12,222

... seven-year clock.

309

00:17:12,282 --> 00:17:13,873

Seven-year clock. But if you're taking it on a drawdown-

310

00:17:13,931 --> 00:17:16,692

If you're taking it on a drawdown, it's income

311

00:17:16,751 --> 00:17:17,502

... it's income.

312

00:17:17,592 --> 00:17:19,392

So if you have excess income-

313

00:17:19,392 --> 00:17:20,502

So be careful

314

00:17:21,161 --> 00:17:26,772

... you can then give that away to your whoever without any seven-year clock.

315

00:17:26,951 --> 00:17:30,252

Yeah. It's just immediately outside of the

316

00:17:31,722 --> 00:17:37,422

IHT estate. And again, just a word of warning for people who are on that sort of

317

00:17:37,542 --> 00:17:43,182

upper wealth scale or getting into the higher wealth spectrum, a lot of the

318

00:17:43,242 --> 00:17:45,222

planning that's currently been done,

319

00:17:46,452 --> 00:17:50,862

what you're actually spending in your retirement is a mixture of you're drawing

320

00:17:50,892 --> 00:17:56,664

down on capital You might have some capital gain, you might have other

321

00:17:56,784 --> 00:18:02,574

sources. So if you're currently using those other sources, and now

322

00:18:02,664 --> 00:18:07,854

you then say, "Right, I'm going to have this extra income," of course, from a tax

323

00:18:07,884 --> 00:18:12,354

perspective, you spend your income first, as in you spend your income on your

324

00:18:12,414 --> 00:18:14,034

groceries and your-

325

00:18:14,184 --> 00:18:14,244

Yeah

326

00:18:14,483 --> 00:18:20,004

... utility bills and so on. So it very well may be, depending on how you're

327

00:18:20,124 --> 00:18:24,804

currently structured, that by just taking the money out of the pension, that's not

328

00:18:24,864 --> 00:18:27,864

going to give you extra income.

329

00:18:27,954 --> 00:18:29,004

That you can then pass on.

330

00:18:29,304 --> 00:18:34,494

Exactly. The problem with this is that it's almost unplannable

331

00:18:35,004 --> 00:18:36,684

because how can you tell-

332

00:18:36,744 --> 00:18:36,894

Well-

333

00:18:37,703 --> 00:18:38,844

... what age you're going to die and-

334

00:18:39,384 --> 00:18:39,624

You can't

335

00:18:40,133 --> 00:18:41,304

... and how much money you're going to need.

336

00:18:41,663 --> 00:18:47,244

But there are wealth planning tools which can

337

00:18:47,394 --> 00:18:53,364

help illustrate, and you can put all the variables in, and it will

338

00:18:53,424 --> 00:18:57,684

help you look at how much money I've got, and you put in the assumptions, if it's

339

00:18:57,714 --> 00:19:01,314

going to grow at 5% and you're going to pay tax at this, that, and the other

340

00:19:01,374 --> 00:19:06,654

amount, how much do I need to retain to get me through to 100, for example.

341

00:19:07,194 --> 00:19:07,225

Mm-hmm.

342

00:19:07,225 --> 00:19:11,574

So there are some tools out there that you could use, which will...

343

00:19:11,964 --> 00:19:16,284

I think what they really do, and I've seen it work in practice, it gives the

344

00:19:16,344 --> 00:19:21,054

individual peace of mind that they're not going to run out of money.

345

00:19:21,475 --> 00:19:25,884

Or if it looks like on their current projection, say, "I want to give money to my

346

00:19:25,944 --> 00:19:30,084

children or my grandchildren," you go, "If you carry on like that, you are going to

347

00:19:30,144 --> 00:19:30,444

run out."

348

00:19:30,712 --> 00:19:32,304

Yes. Then you can rein that back in.

349

00:19:32,364 --> 00:19:32,574

Okay.

350

00:19:32,725 --> 00:19:33,804

So I think it's a really good tool.

351

00:19:33,924 --> 00:19:38,694

Is there anything else in pensions that you want to highlight to advisors?

352

00:19:39,324 --> 00:19:45,265

Certainly, again, for the entrepreneurial client base, a lot of them will have

353

00:19:45,354 --> 00:19:48,954

SSAS. These are small self-administered pension schemes.

354

00:19:49,344 --> 00:19:55,134

Now, a few years ago, the right advice was to put your commercial property into

355

00:19:55,194 --> 00:20:00,684

that pension scheme. Currently now, because of the changes to BPR, business

356

00:20:00,714 --> 00:20:06,084

property relief, and then the pension coming into inheritance tax from April next

357

00:20:06,174 --> 00:20:11,754

year, it's going to be sensible to have that conversation as to whether it's still

358

00:20:11,814 --> 00:20:15,864

the right vehicle to own that commercial property and-

359

00:20:15,894 --> 00:20:16,614

Through a pension

360

00:20:16,643 --> 00:20:22,104

... through a pension. Because in the pension, that property will not attract

361

00:20:22,164 --> 00:20:23,515

business property relief.

362

00:20:23,934 --> 00:20:24,084

Right.

363

00:20:24,204 --> 00:20:29,244

If you're holding it personally, it might, or if you sell it back to the business,

364

00:20:30,024 --> 00:20:35,934

it might. So there may be some rebalancing of assets to do within

365

00:20:35,994 --> 00:20:40,374

those SSAS. Now, this is hugely complicated, so you do-

366

00:20:40,584 --> 00:20:41,154

Need advice

367

00:20:41,183 --> 00:20:44,334

... clients need to talk to their financial advisors and tax advisors.

368

00:20:44,394 --> 00:20:45,054

Okay. Right.

369

00:20:46,644 --> 00:20:51,894

Anything else that advisors should consider given these

370

00:20:52,344 --> 00:20:56,004

changes to the pensions coming in IHT by April 2027?

371

00:20:56,034 --> 00:20:57,984

Is there anything else that they should be looking at?

372

00:20:58,164 --> 00:21:02,574

So from my perspective, so looking at tax as in isolation-

373

00:21:02,634 --> 00:21:03,204

Your world. Yep.

374

00:21:04,404 --> 00:21:09,864

You cannot look at one thing in isolation, because people don't just have a

375

00:21:09,924 --> 00:21:14,004

pension. They will have, generally, they're going to have their own home.

376

00:21:14,364 --> 00:21:16,225

They're going to have ISA savings.

377

00:21:17,094 --> 00:21:21,864

The more you get up the wealth spectrum, the more types of savings and wealth

378

00:21:21,954 --> 00:21:26,874

assets they're going to have. So A, you've got to look across the spectrum of what

379

00:21:26,934 --> 00:21:32,304

you've got. And do you know what? I think it's going to be a really good prompt for

380

00:21:32,364 --> 00:21:36,594

people to start thinking about, what does happen when I die?

381

00:21:36,984 --> 00:21:40,854

Because quite frankly, the conversation doesn't happen enough.

382

00:21:41,393 --> 00:21:46,015

Mm-hmm. And we see time and time again, patriarch dies,

383

00:21:47,334 --> 00:21:50,754

there might be only one family, but there's often now two families.

384

00:21:50,964 --> 00:21:52,404

Everybody starts squabbling,

385

00:21:53,725 --> 00:21:58,524

and that's the last thing that families need when they're going through a grieving

386

00:21:58,614 --> 00:22:03,984

process, to then also squabble about who's getting what or, "I should be-"

387

00:22:04,134 --> 00:22:05,574

And the tax planning hasn't happened first.

388

00:22:05,604 --> 00:22:10,044

And... Yeah. But it's also that if you can actually have those family

389

00:22:10,104 --> 00:22:14,544

conversations, and it won't suit every family, I know that, but some families will

390

00:22:14,604 --> 00:22:20,034

be able to have that facilitated conversation with the family to say, "This is what

391

00:22:20,094 --> 00:22:23,064

my plan is. This is what I think is..."

392

00:22:23,574 --> 00:22:24,714

"This is what I would like to do."

393

00:22:24,774 --> 00:22:27,894

"And this is what I've put in place, and these are the structures I've used." But

394

00:22:27,924 --> 00:22:29,755

you can have those conversations before- Okay

395

00:22:29,813 --> 00:22:34,194

... you put the structures in place, then hopefully that should take out a lot of

396

00:22:34,225 --> 00:22:38,934

the anxiety. Also anxiety from children knowing, "Well, how much am I going to get?

397

00:22:39,504 --> 00:22:44,004

Am I going to be able to pay off my mortgage when mom and dad go?" So there are a

398

00:22:44,034 --> 00:22:47,004

lot of good reasons for being able to have those conversations.

399

00:22:47,754 --> 00:22:52,674

The world of tax. Right. Moving to Daniel. Could these changes...

400

00:22:52,854 --> 00:22:56,574

Are they going to be influencing? Because this was a huge change to pensions last

401

00:22:56,634 --> 00:22:58,674

year, right? Huge changes, Rachel's explained.

402

00:22:59,725 --> 00:23:03,954

How are they going to affect savings behavior, pension flows, that kind of stuff?

403

00:23:04,134 --> 00:23:06,234

The short answer is they're probably not affecting it that much.

404

00:23:06,294 --> 00:23:08,664

Essentially, that ship has sailed.

405

00:23:08,725 --> 00:23:10,824

So I've got this chart, Louise, and for the viewers-

406

00:23:10,884 --> 00:23:11,844

We love a chart.

407

00:23:12,024 --> 00:23:12,774

Yeah. I've only got a couple.

408

00:23:13,074 --> 00:23:15,744

I love a chart. I want it more. I love a chart.

409

00:23:15,774 --> 00:23:18,714

What I want to show you with this chart, it looks at the pension funds and the

410

00:23:18,744 --> 00:23:22,765

insurance companies, how much they own of UK equities.

411

00:23:23,334 --> 00:23:28,015

And since Gordon Brown, the Chancellor in 1997, in July, in his first budget, he

412

00:23:28,044 --> 00:23:31,374

cut the dividend and tax credits. That meant that these pension funds, insurance

413

00:23:31,404 --> 00:23:33,864

companies, couldn't claim back that tax credit.

414

00:23:34,254 --> 00:23:38,904

And so we've seen a reduction in how much they own of UK-listed companies.

415

00:23:39,384 --> 00:23:41,214

They've put their money more into bonds.

416

00:23:41,244 --> 00:23:43,524

That's the sort of financial repression that some people talk about.

417

00:23:43,554 --> 00:23:46,674

There's regulations that came in in 2000 that encouraged that as well.

418

00:23:47,004 --> 00:23:51,084

So the point I'm making about this is sometimes you can have changes in a budget

419

00:23:51,114 --> 00:23:56,904

that have a significant long-lasting impact on flows and in how markets

420

00:23:56,934 --> 00:24:02,064

perform. But as I point out, this ship has sailed, so we've seen that the pension

421

00:24:02,094 --> 00:24:06,294

funds and insurance companies hold just a tiny amount of UK-listed companies.

422

00:24:06,354 --> 00:24:09,504

It's difficult to expect the rest of the world to buy UK equity companies when

423

00:24:09,534 --> 00:24:12,924

you've got our own financial domestic institutions that are not buying into the UK

424

00:24:12,984 --> 00:24:17,184

anyway. So unless we see some sort of changes where we bring back dividend tax

425

00:24:17,213 --> 00:24:19,015

credit, I can't see that happening anytime soon.

426

00:24:19,584 --> 00:24:24,354

So I remember, Daniel and I, we've got a few years under our-

427

00:24:24,384 --> 00:24:25,765

Well, it's youthful looks deceive you.

428

00:24:27,234 --> 00:24:29,844

And I remember that pensions used to be 70/30.

429

00:24:29,994 --> 00:24:30,234

Yeah.

430

00:24:30,594 --> 00:24:35,154

70% equities, 30% bonds, right? And I was reading a Bloomberg article, and it was

431

00:24:35,214 --> 00:24:40,674

saying that UK pension funds, I think something like 50-odd, high

432

00:24:40,944 --> 00:24:42,504

50s percent bonds now.

433

00:24:43,314 --> 00:24:43,434

Yeah.

434

00:24:43,614 --> 00:24:49,374

And I'm like, "For a long-term fund to own half in fixed

435

00:24:49,434 --> 00:24:49,854

income-

436

00:24:50,154 --> 00:24:50,544

Well, that's the opposite

437

00:24:50,633 --> 00:24:52,794

... is extraordinary." Well, I guess it's the opposite to that, basically.

438

00:24:52,824 --> 00:24:53,304

It's opposite to that.

439

00:24:53,334 --> 00:24:54,624

They've been forced into putting it.

440

00:24:55,194 --> 00:24:58,225

And they've been forced to buying it into bonds because of, as we talk about-

441

00:24:58,254 --> 00:24:58,944

Regulations

442

00:24:59,063 --> 00:25:02,244

... regulations, liability, asset matching, all that kind of stuff.

443

00:25:02,274 --> 00:25:03,054

Financial repression.

444

00:25:03,203 --> 00:25:05,424

So the point I want to make here is there's going to be nothing in this budget

445

00:25:05,454 --> 00:25:07,975

that's going to change this anytime soon, and that ship has sailed.

446

00:25:08,004 --> 00:25:09,684

We've already seen the big significant changes.

447

00:25:10,104 --> 00:25:12,894

So unless they're going to start bringing back the dividend tax credit, I can't see

448

00:25:12,924 --> 00:25:14,274

how the budget's going to affect it.

449

00:25:14,334 --> 00:25:19,644

And I guess you're also saying that some changes play out over multi-decades.

450

00:25:19,704 --> 00:25:23,334

Exactly, and this is one example. I know they're trying to bring in these British

451

00:25:23,454 --> 00:25:26,694

ISAs. The Tory government tried to introduce it, but how do you force people to

452

00:25:26,754 --> 00:25:29,604

take their cash ISAs and specifically buy UK equities?

453

00:25:29,934 --> 00:25:33,804

Because if you think about UK equities, as I said earlier, about 80% of their sales

454

00:25:33,834 --> 00:25:38,034

are derived overseas. So you buy a BP or a Shell, what part of that is UK?

455

00:25:38,874 --> 00:25:41,874

Okay, well, let's now move on to savings and investments.

456

00:25:41,965 --> 00:25:44,844

So, savings income, Rachel.

457

00:25:45,234 --> 00:25:48,745

Yes. So let's be clear as to what's happened.

458

00:25:49,225 --> 00:25:54,954

Last year, in the last budget, the 2025 budget, there was a 2%

459

00:25:55,044 --> 00:26:00,594

increase to the income tax rates to be applied to interest, rental income, which

460

00:26:00,594 --> 00:26:02,304

we're going to come onto, and dividends.

461

00:26:02,364 --> 00:26:02,514

Mm-hmm.

462

00:26:03,204 --> 00:26:05,544

This year... And that hasn't even come in yet.

463

00:26:05,665 --> 00:26:06,745

Oh. When's it coming in?

464

00:26:07,225 --> 00:26:08,064

Next April.

465

00:26:08,154 --> 00:26:08,334

Okay.

466

00:26:08,725 --> 00:26:14,665

So April '27. This year, we've got an additional 2% on interest income and

467

00:26:14,725 --> 00:26:20,364

rental income. So from April next year, the rates of income

468

00:26:20,454 --> 00:26:24,475

tax for interest will be 24% for

469

00:26:25,548 --> 00:26:31,488

44% and 49%. So it's 4% increase because

470

00:26:31,548 --> 00:26:34,128

it's two from last year and two from this year.

471

00:26:34,428 --> 00:26:34,698

Okay.

472

00:26:35,508 --> 00:26:36,438

Dividends, we kind of-

473

00:26:36,708 --> 00:26:38,688

Oh, yes. There's two dividends. There are two dividends.

474

00:26:38,718 --> 00:26:44,268

Okay. So dividends only, the 2% increase only came last year,

475

00:26:44,718 --> 00:26:48,558

and they're the most peculiar rates. It's 1.75, whatever.

476

00:26:49,548 --> 00:26:54,589

So, but that's only happening last year. There's not an additional 2% this year.

477

00:26:54,889 --> 00:26:56,568

Right. So dividends has not changed.

478

00:26:56,779 --> 00:26:59,508

Well, you have the 2% from last year-

479

00:26:59,567 --> 00:26:59,598

Last year

480

00:26:59,657 --> 00:27:04,669

... which comes into effect in April next year, but no additional this year.

481

00:27:04,698 --> 00:27:07,188

Okay, ISAs. There was quite a lot about ISAs.

482

00:27:07,428 --> 00:27:11,928

Lots about ISAs. Again, because as you were referencing, there had been this

483

00:27:12,048 --> 00:27:15,919

change, there's been this conversation about what we should do with ISAs.

484

00:27:16,008 --> 00:27:21,919

So where we have landed is that you can still put £20,000 per annum

485

00:27:22,008 --> 00:27:22,998

into an ISA.

486

00:27:23,149 --> 00:27:25,128

A cash ISA. It's reversed.

487

00:27:25,548 --> 00:27:30,139

Exactly. This £12,000 business is out the window.

488

00:27:30,258 --> 00:27:32,149

Ignored what Rachel Reeves had announced.

489

00:27:32,178 --> 00:27:34,098

And from what I understand from, other-

490

00:27:34,097 --> 00:27:35,448

It was impossible to administer anyway

491

00:27:35,898 --> 00:27:37,400

... it was so difficult- Yeah

492

00:27:37,727 --> 00:27:41,568

... to actually administer from a, behind the scenes perspective.

493

00:27:41,598 --> 00:27:41,839

Exactly.

494

00:27:41,899 --> 00:27:44,658

So I think everybody is thankful that that's gone.

495

00:27:44,748 --> 00:27:46,458

So we're 12, uh, £20,000-

496

00:27:47,149 --> 00:27:47,598

Cash ISA

497

00:27:48,257 --> 00:27:53,448

... same as it has been. There is some tinkering around the edges with the lifetime

498

00:27:53,538 --> 00:27:59,389

ISA, and then there is a consultation on a new ISA for

499

00:27:59,478 --> 00:28:04,399

first-time investors. Again, we have no detail on that at the moment.

500

00:28:05,058 --> 00:28:09,288

I presume that's sort of focused on youngsters.

501

00:28:09,378 --> 00:28:10,008

You know, 18-

502

00:28:10,128 --> 00:28:11,029

Are you excited?

503

00:28:11,447 --> 00:28:12,139

... 22-year-olds.

504

00:28:12,228 --> 00:28:13,428

Well, a little bit, but I mean, uh-

505

00:28:13,669 --> 00:28:14,928

Do they have that sort of money?

506

00:28:15,348 --> 00:28:19,308

Certainly if asked my daughter, she's always asking me for money. I doubt it, no.

507

00:28:19,368 --> 00:28:21,408

Yeah. I know what that feels like.

508

00:28:23,089 --> 00:28:27,589

And then there, so we've got the lifetime ISA, which is all about the £450,000

509

00:28:27,649 --> 00:28:28,128

limit.

510

00:28:28,218 --> 00:28:28,639

Yes.

511

00:28:29,268 --> 00:28:30,348

That you still get your money back.

512

00:28:30,589 --> 00:28:34,368

You've got the new first-time buyer's ISA and the cash ISA. Anything else on ISAs?

513

00:28:35,029 --> 00:28:35,208

That was-

514

00:28:35,238 --> 00:28:36,858

And that, yeah, new investing.

515

00:28:36,948 --> 00:28:39,198

And then finally, the capital gains tax.

516

00:28:39,978 --> 00:28:45,768

So again, huge sigh of relief, certainly from a lot of the clients that I'm talking

517

00:28:45,858 --> 00:28:51,708

to. No changes to the headline rates of CGT, so still 24% for an

518

00:28:51,768 --> 00:28:57,498

individual. No exit tax because again, entrepreneurs were getting

519

00:28:58,128 --> 00:29:00,139

very, very worked up about

520

00:29:01,818 --> 00:29:04,128

an exit tax potentially coming in.

521

00:29:04,308 --> 00:29:09,108

Which is effectively, you do a deemed disposal of your assets when you become

522

00:29:09,169 --> 00:29:10,758

non-UK tax resident.

523

00:29:11,088 --> 00:29:13,758

Mm. So it's a dry tax charge, and it's the worst of all worlds.

524

00:29:14,089 --> 00:29:15,978

So none of those things have happened.

525

00:29:16,068 --> 00:29:20,598

So I think from CGT perspective, it's actually calm.

526

00:29:21,139 --> 00:29:23,419

In terms of like tax wrappers-

527

00:29:23,598 --> 00:29:23,748

Yeah

528

00:29:24,168 --> 00:29:29,688

... what should IFAs consider when reviewing all these different sort of

529

00:29:29,779 --> 00:29:33,348

tax wrappers and the tax vehicles across the client?

530

00:29:33,348 --> 00:29:34,038

Across the board.

531

00:29:34,128 --> 00:29:34,248

Yeah.

532

00:29:34,728 --> 00:29:38,597

So again, it depends of... firstly, obviously, it depends on your client, their

533

00:29:38,658 --> 00:29:39,889

circumstances, and so on.

534

00:29:39,917 --> 00:29:40,908

Their tax circumstances, yeah.

535

00:29:41,238 --> 00:29:47,089

But if we're looking as a general comment, ISAs, of course, because as we

536

00:29:47,149 --> 00:29:50,298

all know, income tax-free and CGT-free.

537

00:29:51,048 --> 00:29:54,228

Just remember, they are not IHT free.

538

00:29:54,408 --> 00:29:54,589

HT free.

539

00:29:54,649 --> 00:29:58,339

They do fall in within your IHT estate. But super wrapper.

540

00:29:59,238 --> 00:30:03,889

You've got pensions for those who have the relevant earnings, and you can do the

541

00:30:03,978 --> 00:30:07,788

mini amount in for those who don't. That's always a good one.

542

00:30:08,029 --> 00:30:13,488

And again, you've got to look at each individual circumstances, how much tax relief

543

00:30:13,518 --> 00:30:18,438

are they going to get. But again, because of that compounding effect of the growth

544

00:30:18,498 --> 00:30:24,078

in the tax-free environment and the 25% tax-free that comes out at the end,

545

00:30:24,139 --> 00:30:27,978

assuming you haven't gone over your one million and a bit allowance.

546

00:30:28,548 --> 00:30:30,318

It's still a really, really good wrapper.

547

00:30:30,978 --> 00:30:36,318

On the more sophisticated scale, I think we're going to get more and more questions

548

00:30:36,438 --> 00:30:42,078

about, should I use a personal investment company or a family investment company?

549

00:30:42,468 --> 00:30:48,108

So this is a regular UK corporate vehicle, so there's nothing more fancy

550

00:30:48,198 --> 00:30:50,508

about it than that. It is a regular vehicle.

551

00:30:50,779 --> 00:30:55,128

But instead of holding my stocks and shares personally, it's held through a

552

00:30:55,188 --> 00:30:57,589

company. Now, why would I want to do that?

553

00:30:58,038 --> 00:31:03,649

Because companies pay tax at the corporation tax rate, which is 25%.

554

00:31:04,279 --> 00:31:09,468

Okay? So if I'm holding them personally, as we've just discussed, tax rates now can

555

00:31:09,498 --> 00:31:15,318

be up to 49% off of cash. Also, corporate, general rule,

556

00:31:15,768 --> 00:31:19,728

do not pay any tax on dividends that they receive.

557

00:31:20,149 --> 00:31:26,058

So if my corporate, my family company, is invested in stocks and shares and it's

558

00:31:26,089 --> 00:31:28,249

receiving dividend as its income- Dividends

559

00:31:28,638 --> 00:31:34,488

... it doesn't pay tax at all. So again, you get that sort of impact of

560

00:31:34,578 --> 00:31:38,058

tax-free growth on what you're earning from those stocks and shares.

561

00:31:38,419 --> 00:31:43,339

It will pay tax on capital gains, and it will pay tax on other forms of income.

562

00:31:44,118 --> 00:31:47,568

So those are vehicles that we need to look at.

563

00:31:47,899 --> 00:31:53,149

The second part to looking at those vehicles is, great, I've got this tax

564

00:31:53,238 --> 00:31:55,518

advantage. How do I get my money out?

565

00:31:55,608 --> 00:31:55,908

Mm.

566

00:31:55,938 --> 00:31:57,649

I've got to be able to get my money out.

567

00:31:57,978 --> 00:32:03,408

So of course, if you're taking it out as a dividend, then that's not, may not be as

568

00:32:03,498 --> 00:32:06,738

efficient as you would like it to be because of the dividend tax rate.

569

00:32:07,339 --> 00:32:12,288

But to start with, you're looking at how do you fund this vehicle, and they will

570

00:32:12,378 --> 00:32:15,708

often be funded by some sort of loan.

571

00:32:16,399 --> 00:32:18,529

So you either have a preference share if you want

572

00:32:19,818 --> 00:32:25,669

a security or just a simple contract loan, which means I got my half a

573

00:32:25,698 --> 00:32:28,758

million pounds or more than that for one of these vehicles, really.

574

00:32:28,968 --> 00:32:31,639

Couple of million pounds, puts in as a loan.

575

00:32:31,908 --> 00:32:37,758

Then I can just draw out the money that I need when I draw down on that loan,

576

00:32:38,298 --> 00:32:44,238

rather than taking a dividend and of course, the repayments of that loan to me is

577

00:32:44,328 --> 00:32:45,078

tax-free.

578

00:32:45,468 --> 00:32:45,738

Okay.

579

00:32:46,098 --> 00:32:51,317

So it's complex, and it has costs, and it has ongoing costs.

580

00:32:51,649 --> 00:32:52,969

So this is only for those people-

581

00:32:53,028 --> 00:32:56,029

But it might be something that the IFA should start be thinking

582

00:32:56,088 --> 00:32:57,707

about. They need to start thinking about.

583

00:32:57,797 --> 00:33:03,529

So again, it's only for those people, I would say very, very minimum, three

584

00:33:03,589 --> 00:33:04,279

million, but-

585

00:33:04,968 --> 00:33:05,089

Okay

586

00:33:05,177 --> 00:33:07,848

... it's inching up. So it's not for the lower end of the

587

00:33:07,907 --> 00:33:09,048

scale. So fill up your ISAs.

588

00:33:09,589 --> 00:33:09,798

Yeah.

589

00:33:09,828 --> 00:33:13,098

Fill up your pension. But then after that, there is other ways.

590

00:33:13,158 --> 00:33:17,149

There are other things. And again, IFAs will be familiar with offshore bonds and so

591

00:33:17,268 --> 00:33:17,448

on.

592

00:33:19,488 --> 00:33:21,108

We could also put in there,

593

00:33:22,639 --> 00:33:25,639

if you've got people getting onto the later-

594

00:33:25,908 --> 00:33:25,998

Mm-hmm

595

00:33:26,207 --> 00:33:31,728

... stages of their life, they might want to consider using some of their funds to

596

00:33:31,788 --> 00:33:33,018

buy some life insurance.

597

00:33:33,348 --> 00:33:33,558

Okay.

598

00:33:33,649 --> 00:33:36,828

That's an entirely separate conversation, but that is-

599

00:33:37,608 --> 00:33:38,178

Tax efficient

600

00:33:38,357 --> 00:33:40,128

... tax efficient when you're looking.

601

00:33:40,188 --> 00:33:44,748

Again, it's a different way to fund an IHT liability down the line.

602

00:33:44,808 --> 00:33:48,889

And so what's quite interesting, I think, is what you're sort of trying to suggest

603

00:33:49,068 --> 00:33:51,529

is diversification of tax-

604

00:33:51,529 --> 00:33:52,518

Lots of different things

605

00:33:52,607 --> 00:33:54,679

... tax structure is what you're trying to

606

00:33:54,677 --> 00:33:56,298

say. I think it's a really great way of putting it.

607

00:33:56,328 --> 00:34:00,048

We're used to talking about diversification in investments-

608

00:34:00,078 --> 00:34:00,139

Assets

609

00:34:00,227 --> 00:34:04,458

... aren't we? Whereas we don't talk about it that way when we're talking about

610

00:34:04,578 --> 00:34:10,308

tax. And I think if you get your head around that, then it makes a lot of sense.

611

00:34:10,368 --> 00:34:14,149

Because if there are tax advantages-

612

00:34:14,328 --> 00:34:14,419

Yeah

613

00:34:14,747 --> 00:34:16,518

... they are controlled by the government.

614

00:34:16,608 --> 00:34:16,998

Yes.

615

00:34:17,058 --> 00:34:20,358

And they are controlled by politicians, so they can change.

616

00:34:20,419 --> 00:34:20,748

Yes.

617

00:34:20,779 --> 00:34:24,978

And so having diversification against political risk is probably not a bad idea.

618

00:34:25,038 --> 00:34:25,458

There we go.

619

00:34:26,868 --> 00:34:30,529

So this is all with the tax, what's going on.

620

00:34:31,608 --> 00:34:35,779

The budget on UK businesses, UK equities.

621

00:34:35,839 --> 00:34:39,768

I mean, you've sort of suggested that the outlook isn't great.

622

00:34:40,248 --> 00:34:43,399

Yeah, but if you want to look at how the budget affects markets, I mean, there can

623

00:34:43,428 --> 00:34:45,678

be occasions where it affects it a lot in the short term.

624

00:34:45,738 --> 00:34:50,298

So you only have to go back to 2022, and you saw this spike in gilt yields, and of

625

00:34:50,328 --> 00:34:51,768

course, the Bank of England had to step in.

626

00:34:52,158 --> 00:34:55,488

But if you fast forward to today and you look at the budget yesterday, it can

627

00:34:55,548 --> 00:34:58,548

affect specific sectors. So we saw that the banks done very well.

628

00:34:58,758 --> 00:34:58,878

Mm-hmm.

629

00:34:59,418 --> 00:35:02,449

You might think that's strange because the government raised the surcharge from 3%

630

00:35:02,478 --> 00:35:05,508

to 6%, but the equivalent number was something like 8%, so it came in less than

631

00:35:05,538 --> 00:35:09,858

expected. Secondly, it was only for 15 months, but it might be extended.

632

00:35:10,248 --> 00:35:14,178

And the other thing is it goes back to the ISAs because instead of 12,000 you now

633

00:35:14,208 --> 00:35:18,558

have 20,000 cash ISAs. This is important because this is the funding for the banks

634

00:35:18,588 --> 00:35:20,418

that they can turn to. This is sticky money.

635

00:35:20,808 --> 00:35:23,118

So then they can use this money to then go on and lend money.

636

00:35:23,448 --> 00:35:26,568

Mm. So that's why some of the banks were up 3% or 4% at some point yesterday.

637

00:35:26,928 --> 00:35:28,518

So it can affect them really in the short term.

638

00:35:28,578 --> 00:35:32,838

But if you want to look at what will affect equities, UK equities, over the longer

639

00:35:32,898 --> 00:35:36,018

term, you have to go down to two things. One is the fundamentals.

640

00:35:36,468 --> 00:35:40,398

And on this point, if you look at earnings expectations by the consensus, it's 5%

641

00:35:40,428 --> 00:35:45,798

for MSCI UK for next year in 2027. But if you look at the world ex-UK, I'm afraid

642

00:35:45,828 --> 00:35:48,949

it's 18%. And of course, a lot of that is weighted by the US.

643

00:35:49,038 --> 00:35:50,388

Obviously, you've got a lot more technology there.

644

00:35:50,779 --> 00:35:54,438

The fact that the UK hasn't got these big tech companies obviously has a dampening

645

00:35:54,468 --> 00:35:55,938

impact on those earnings expectations.

646

00:35:55,968 --> 00:36:00,108

So you need to, number one, try and expect those earnings expectations to rise at

647

00:36:00,199 --> 00:36:01,218

least to match the rest of the world.

648

00:36:01,578 --> 00:36:06,348

And the second thing is looking at the valuations. Since 2014, UK's been derated.

649

00:36:06,408 --> 00:36:07,518

So you've had your Brexit.

650

00:36:07,758 --> 00:36:07,848

Mm.

651

00:36:08,029 --> 00:36:12,048

I mentioned it there. Then you also have all the uncertainty, the political

652

00:36:12,108 --> 00:36:14,358

paralysis. We remember that in the 2010s.

653

00:36:14,718 --> 00:36:17,658

And the fact that we haven't got much in terms of technology, in terms of listed

654

00:36:17,718 --> 00:36:22,248

companies. So unless we start to see the earnings expectations start to rise, it

655

00:36:22,279 --> 00:36:26,394

makes it difficult for UK equities to get that valuation uplift So the budget only

656

00:36:26,424 --> 00:36:28,284

affects it really in the short term.

657

00:36:29,034 --> 00:36:32,634

It can only affect it in the long term from that chart that showed you on chart

658

00:36:32,694 --> 00:36:36,504

one. But generally, you need to look at the earnings expectations and valuations.

659

00:36:37,224 --> 00:36:41,004

The OBR always publishes an updated economic forecast with the budget.

660

00:36:41,874 --> 00:36:43,584

What did they say?

661

00:36:44,275 --> 00:36:47,244

The first thing is they downgraded growth for next year.

662

00:36:47,454 --> 00:36:51,594

So it was 1.3% in March, and they downgraded that to 1%.

663

00:36:51,624 --> 00:36:54,084

Of course, they're going to say higher energy costs, off-gem are going to raise

664

00:36:54,114 --> 00:36:56,874

their prices, and household consumption is going to be a little bit weaker.

665

00:36:57,624 --> 00:37:00,504

Other interesting bits in that is if you look at the number of new homes

666

00:37:00,564 --> 00:37:03,714

completions, that's been steadily downgraded. That's a bit concerning.

667

00:37:03,775 --> 00:37:07,944

Also, real GDP per capita or real household income, that's also been downgraded.

668

00:37:08,004 --> 00:37:11,934

So there are some significant headwinds for domestic growth that we need to watch

669

00:37:12,025 --> 00:37:15,084

out for. But also, we've got higher inflation.

670

00:37:15,204 --> 00:37:19,434

Of course, that's related to energy costs, and that crimps real spending power as

671

00:37:19,494 --> 00:37:23,275

well. So if you look beyond 2027, it's not shoot the lights out.

672

00:37:23,304 --> 00:37:25,284

It's still growing at 1%. That's not great.

673

00:37:25,764 --> 00:37:29,844

But then you look at the US, it's 2 to 2.5%, so that's the sort of benchmark we

674

00:37:29,874 --> 00:37:32,484

should be growing towards, but we need a lot more investment in technology at

675

00:37:32,544 --> 00:37:34,704

least, and more productivity gains to achieve that.

676

00:37:35,184 --> 00:37:38,304

And the key thing really yesterday was also fiscal headroom.

677

00:37:38,394 --> 00:37:38,934

So this is

678

00:37:40,374 --> 00:37:43,734

a cash buffer in case things go wrong.

679

00:37:44,064 --> 00:37:49,914

And obviously, oil prices heading towards $120, inflation's increasing,

680

00:37:50,064 --> 00:37:52,944

interest rates are increasing, Bank of England's going to put rates up, expected to

681

00:37:52,974 --> 00:37:56,544

put rates up next week. The fiscal headroom. Talk to me a little bit about that.

682

00:37:56,574 --> 00:38:01,794

And it seemed that even though it's been significantly reduced,

683

00:38:02,184 --> 00:38:03,984

markets were not spooked by it.

684

00:38:04,434 --> 00:38:08,304

Not really. The fiscal headroom, it's the margin of error for the Chancellor.

685

00:38:08,364 --> 00:38:08,514

Yes.

686

00:38:09,234 --> 00:38:14,454

So what he means is by '29, 2030, he wants to have the current spending in balance

687

00:38:14,484 --> 00:38:17,094

with taxes raised. So the balanced budget.

688

00:38:17,424 --> 00:38:20,124

It doesn't include capital investment because that's the investment for the future.

689

00:38:20,964 --> 00:38:24,114

So he reduced that. It was $24 billion in March.

690

00:38:24,984 --> 00:38:28,044

The concern was that that fiscal headroom would come down to about $10 billion, it

691

00:38:28,074 --> 00:38:31,914

probably did, and he settled for a figure of $15 billion, so he's raised a bit of

692

00:38:31,914 --> 00:38:35,304

tax revenues to balance that out. And the idea here is just to give it a little bit

693

00:38:35,334 --> 00:38:40,224

of fiscal credibility. But of course, keep raising taxes, it does affect growth and

694

00:38:40,254 --> 00:38:43,374

the growth outlook. So it does give him a little bit of fiscal credibility.

695

00:38:43,434 --> 00:38:48,984

But if you think about it, you've got $15 billion out of spending of 1.4 trillion.

696

00:38:49,493 --> 00:38:50,994

Yeah. So it's very, very, very-

697

00:38:51,025 --> 00:38:52,764

Do your percentages.

698

00:38:52,824 --> 00:38:57,894

Yeah, it's tiny. So if we have another sort of blow up, I guess, in the Middle

699

00:38:57,924 --> 00:39:02,034

East, bad word, but if we have that sort of situation, then energy prices could get

700

00:39:02,094 --> 00:39:05,634

higher. And then again, we'll see probably higher interest rates that will erode

701

00:39:05,784 --> 00:39:07,404

that fiscal headroom. So-

702

00:39:07,734 --> 00:39:08,124

Yes.

703

00:39:08,154 --> 00:39:09,025

That's where we are.

704

00:39:09,114 --> 00:39:13,855

Yeah. Now your second chart is you're looking at government borrowing costs.

705

00:39:13,914 --> 00:39:14,064

Yes.

706

00:39:14,124 --> 00:39:19,584

The UK gilt yields compared to US government borrowing costs, which is US

707

00:39:19,644 --> 00:39:25,134

Treasuries. So the chart's on the screen. How do you interpret this chart?

708

00:39:25,194 --> 00:39:25,404

Yeah.

709

00:39:25,434 --> 00:39:26,694

Why is this important for IFAs?

710

00:39:27,025 --> 00:39:29,874

I probably want to say this because I started off by saying, "Look to Washington

711

00:39:29,934 --> 00:39:30,504

rather than Westminster."

712

00:39:30,564 --> 00:39:31,014

You did.

713

00:39:31,284 --> 00:39:33,714

And this is the point I really want to drill down to.

714

00:39:34,074 --> 00:39:38,813

If you look at the US 10-year Treasury yield, that's the blue line, and then you've

715

00:39:38,844 --> 00:39:42,264

got the UK 10-year gilt yield. You can see that it's a very close line.

716

00:39:42,594 --> 00:39:46,704

But let's face it, the US Treasury market's $40 trillion. That dominates.

717

00:39:46,764 --> 00:39:51,324

So when the US yields start to rise, they certainly drive up the UK yields.

718

00:39:51,624 --> 00:39:53,094

And the other line you've got there is the red line.

719

00:39:53,124 --> 00:39:56,514

I deliberately put that in there because that's the Congressional Budget Office.

720

00:39:56,544 --> 00:39:57,924

It's a nonpartisan organization.

721

00:39:58,254 --> 00:40:01,344

Their growth forecast over the next 10 years, along with these 10-year treasuries

722

00:40:01,374 --> 00:40:06,054

are these bonds. And what you can see is all we've seen is US Treasury yields have

723

00:40:06,084 --> 00:40:10,014

been moving up from very, very low levels after the pandemic in 2020.

724

00:40:10,614 --> 00:40:11,814

It's a normalization.

725

00:40:12,025 --> 00:40:12,084

Mm.

726

00:40:12,144 --> 00:40:15,144

But all it's doing is matching the level of normal GDP growth.

727

00:40:15,174 --> 00:40:18,775

That's real GDP growth plus inflation. And of course, the UK follows it.

728

00:40:19,044 --> 00:40:19,134

Mm.

729

00:40:19,164 --> 00:40:24,025

So I'll be less concerned about this because if yields are rising, there's

730

00:40:24,324 --> 00:40:26,814

certainly an element of concerns about debt sustainability.

731

00:40:28,014 --> 00:40:31,164

But if the gilt yields and the Treasury yields are rising because growth is

732

00:40:31,224 --> 00:40:34,464

stronger, it shouldn't really be fear for investors when you're looking at

733

00:40:34,494 --> 00:40:37,525

certainly equity markets. And certainly, we've seen a normalization there.

734

00:40:37,614 --> 00:40:41,004

If you're just using... I'm not saying this is the peak of yields, but if you can

735

00:40:41,064 --> 00:40:44,874

see where we are at the moment, the level of the 10-year Treasury yield is roughly

736

00:40:45,294 --> 00:40:46,734

in line with the normal growth expectation.

737

00:40:46,764 --> 00:40:50,004

So this is interesting. So you're looking at the gilt yields, the government

738

00:40:50,034 --> 00:40:54,594

borrowing costs, and you're saying it shows that growth is there.

739

00:40:55,254 --> 00:40:55,794

In the US.

740

00:40:55,884 --> 00:40:56,244

Okay.

741

00:40:56,424 --> 00:40:56,574

And that's right-

742

00:40:56,605 --> 00:41:00,355

You're not saying it's to do with fiscal credibility and the bond vigilantes coming

743

00:41:00,414 --> 00:41:00,895

in and looking- No.

744

00:41:01,133 --> 00:41:01,254

No, that's-

745

00:41:01,313 --> 00:41:04,464

... looking at the debt levels in the US and UK and saying, "Actually, I want

746

00:41:04,525 --> 00:41:06,414

higher returns for that." You're not saying

747

00:41:06,443 --> 00:41:07,554

that. I'm not saying that, but where-

748

00:41:07,643 --> 00:41:08,214

That's interesting

749

00:41:08,363 --> 00:41:10,044

... where it does get concerning is the

750

00:41:11,244 --> 00:41:15,114

US can tolerate much higher bond yields because its growth rate is higher than it

751

00:41:15,204 --> 00:41:15,894

costs to borrow.

752

00:41:16,434 --> 00:41:16,944

Of course.

753

00:41:16,943 --> 00:41:19,494

The UK is less likely because it hasn't got the growth.

754

00:41:20,184 --> 00:41:23,064

So it's a bit more difficult for it to pay its bills.

755

00:41:23,484 --> 00:41:26,634

But what I would say is at least you can say, look, the rise that we've seen in

756

00:41:26,694 --> 00:41:28,674

Treasury yields is reflective of stronger growth.

757

00:41:29,064 --> 00:41:30,984

And as investors, that's really what you want.

758

00:41:31,254 --> 00:41:36,114

Of course, you'll get to some level where interest costs become too high, and then

759

00:41:36,144 --> 00:41:37,914

you start getting a debt sustainability issue.

760

00:41:37,974 --> 00:41:41,784

But so long as the US can grow, at least we put that can down the road.

761

00:41:41,844 --> 00:41:43,704

So you prefer US Treasuries than gilts?

762

00:41:44,514 --> 00:41:44,664

Well-

763

00:41:44,694 --> 00:41:46,015

There's tax advantages for gilts ...

764

00:41:46,073 --> 00:41:48,234

tax advantages for gilts, and certainly that's-

765

00:41:48,474 --> 00:41:51,564

Are you at a level in gilts that you like?

766

00:41:52,855 --> 00:41:56,904

Because the issue with fixed income is always, inflation erodes it away, and it's

767

00:41:56,934 --> 00:41:58,824

fixed income. So if you hold

768

00:42:00,174 --> 00:42:03,684

bonds, if you hold fixed income in an inflationary environment, that can be

769

00:42:03,744 --> 00:42:04,914

extremely painful.

770

00:42:05,184 --> 00:42:05,514

Yeah. Got-

771

00:42:05,544 --> 00:42:06,294

But you... Go on.

772

00:42:06,654 --> 00:42:08,184

Can I say you're catching a falling knife here.

773

00:42:08,574 --> 00:42:11,064

So I'm going to be an economist and stand on the fence with this one.

774

00:42:11,094 --> 00:42:14,844

But what I would say is a better environment for equities rather than bonds because

775

00:42:14,874 --> 00:42:18,025

we don't really know where we're going in terms of normal growth.

776

00:42:18,264 --> 00:42:19,404

Better environment for equities than-

777

00:42:19,434 --> 00:42:22,914

Better environment for equities because at least companies can raise their prices,

778

00:42:22,974 --> 00:42:25,914

whereas you've got a fixed yield coming from these bonds.

779

00:42:25,974 --> 00:42:29,544

So certainly, we don't know what happens on the US state side with the president.

780

00:42:29,874 --> 00:42:32,544

He could start another war somewhere, and then higher energy costs, so

781

00:42:33,083 --> 00:42:34,374

yeah. So obviously, that's the key thing.

782

00:42:34,434 --> 00:42:36,864

So we've got Bank of England next week expected to raise rates.

783

00:42:37,374 --> 00:42:41,094

Inflation outlook, we had the new figures from the OBR, but it's still very

784

00:42:41,154 --> 00:42:41,724

uncertain.

785

00:42:41,754 --> 00:42:42,534

It's still very uncertain.

786

00:42:42,564 --> 00:42:46,704

Because remember last time, Putin, we got to over double-digit inflation.

787

00:42:46,734 --> 00:42:48,504

That's not what we're expecting this time.

788

00:42:48,804 --> 00:42:51,623

Well, that's not what we're expecting, but we didn't expect that back in 2022, did

789

00:42:51,684 --> 00:42:54,353

we? So it can happen. So we-

790

00:42:54,384 --> 00:42:55,373

So there's still lots of uncertainty

791

00:42:55,553 --> 00:42:57,924

... there's still lots of uncertainty, particularly for energy prices.

792

00:42:59,124 --> 00:43:01,824

But at least we can say the difference with the equity market is that these

793

00:43:01,855 --> 00:43:05,934

companies can raise prices in this environment where you can't benefit from bonds

794

00:43:05,994 --> 00:43:07,074

if you buy conventional bonds.

795

00:43:08,934 --> 00:43:10,134

You'll lose money in real terms.

796

00:43:10,434 --> 00:43:11,034

And sterling?

797

00:43:11,784 --> 00:43:15,474

Sterling, our view there is really that sterling has room to appreciate.

798

00:43:15,504 --> 00:43:17,694

It's not because our fundamentals are that good.

799

00:43:18,144 --> 00:43:20,124

It's really when you look at sterling against the dollar.

800

00:43:20,184 --> 00:43:24,144

The dollar is really undermined by the America First policy in the US.

801

00:43:24,504 --> 00:43:27,954

President Trump. Let's face it, he wants the US to remain competitive, so he wants

802

00:43:27,984 --> 00:43:31,644

the dollar to fall, so exports are competitive, but also the fact that it's an

803

00:43:31,674 --> 00:43:34,855

attractive investment destination. So he's really putting downward pressure on it.

804

00:43:34,884 --> 00:43:38,034

But the other thing is, if you look at the budget deficit in the US, it's more than

805

00:43:38,244 --> 00:43:38,964

6% of GDP.

806

00:43:39,084 --> 00:43:39,624

Huge. Yep.

807

00:43:39,654 --> 00:43:42,775

So they've been living way, way beyond their means for some time.

808

00:43:43,344 --> 00:43:44,874

And that should put downward pressure on the dollar.

809

00:43:44,904 --> 00:43:46,525

But that hasn't happened in the last year.

810

00:43:46,884 --> 00:43:51,025

And the reason for that is lots of money flows are going to the US to invest in AI.

811

00:43:51,324 --> 00:43:53,814

That really is the center of AI at the moment.

812

00:43:54,234 --> 00:43:57,294

But at some point, that money might start to disappear a little bit.

813

00:43:57,624 --> 00:43:59,964

And it's almost like the Wile E. Coyote and the Roadrunner.

814

00:44:00,564 --> 00:44:02,874

You'll start to see there's nothing actually supporting it, and then you could

815

00:44:02,934 --> 00:44:06,504

start to see the dollar fall. So it really is an ugly contest where you could see

816

00:44:06,564 --> 00:44:08,154

sterling appreciate, not because of our-

817

00:44:08,244 --> 00:44:09,624

But the least ugly currency.

818

00:44:09,834 --> 00:44:11,934

Least... I was about to say that, but yes, least ugly.

819

00:44:12,684 --> 00:44:16,974

All right, let's look at property because, Rachel, again, for those who have

820

00:44:17,034 --> 00:44:18,295

buy-to-let properties- Yep

821

00:44:18,893 --> 00:44:19,824

... increased tax.

822

00:44:19,884 --> 00:44:23,154

Yes. Again, we're back to this additional 2%.

823

00:44:23,605 --> 00:44:27,744

So they had 2% last year, 2% this year, or in last budget, this year's budget.

824

00:44:28,044 --> 00:44:33,474

So come April next year, there's an additional 4% on your net rental income.

825

00:44:33,564 --> 00:44:38,304

So yes, it's 24%, 44% and 49%.

826

00:44:38,454 --> 00:44:40,974

49%. And you have people asking you about-

827

00:44:41,034 --> 00:44:41,154

Yep

828

00:44:41,513 --> 00:44:42,835

... if I've got a buy-to-let property- Yeah

829

00:44:43,223 --> 00:44:44,424

... should I put it into a company?

830

00:44:44,454 --> 00:44:44,544

Yeah.

831

00:44:44,574 --> 00:44:46,074

Or should I put it, give it to my children?

832

00:44:46,404 --> 00:44:49,074

And what you're saying is lots of tax implications.

833

00:44:49,073 --> 00:44:54,714

There's a lot. Yeah, it's actually not that tax efficient to take your

834

00:44:54,804 --> 00:44:58,525

personally owned buy-to-let properties and put them in a company.

835

00:44:59,004 --> 00:45:03,684

There are some ways of doing it, but it's really complicated, and you've got to be

836

00:45:03,714 --> 00:45:09,474

running what we call a business. And a business is not holding passive investments

837

00:45:09,594 --> 00:45:13,944

as a property as a buy-to-let. So for the vast majority of people, they will not be

838

00:45:14,004 --> 00:45:17,304

able to do that incorporation of their buy-to-let tax efficiently.

839

00:45:18,144 --> 00:45:21,864

If they want to drop those properties down to their children, they've got to think,

840

00:45:22,224 --> 00:45:27,234

is there a capital gain? Because it will be a dry tax charge, i.e., there are no

841

00:45:27,294 --> 00:45:31,044

sale proceeds from which to pay the tax.

842

00:45:31,105 --> 00:45:31,224

Mm-hmm.

843

00:45:31,344 --> 00:45:35,544

Have I got a mortgage on it? Is there going to be a stamp duty land tax liability?

844

00:45:36,025 --> 00:45:36,504

Et cetera.

845

00:45:36,594 --> 00:45:38,815

So there's not an easy fix- No

846

00:45:39,263 --> 00:45:43,494

... is what you're basically saying. And now finally, Daniel, your third chart.

847

00:45:43,764 --> 00:45:44,544

Some intrigue here.

848

00:45:44,664 --> 00:45:45,775

I know. I do love-

849

00:45:46,134 --> 00:45:46,704

You like a chart, don't you?

850

00:45:46,764 --> 00:45:48,504

I do love a chart. Yeah, it tells you everything.

851

00:45:48,563 --> 00:45:50,124

A picture paints a thousand words.

852

00:45:50,184 --> 00:45:50,814

I think so.

853

00:45:50,874 --> 00:45:53,394

So what thousand words is this picture telling us?

854

00:45:53,454 --> 00:45:56,394

It's really telling us about the uncertainty in the housing market.

855

00:45:56,424 --> 00:46:00,355

The housing market's a very important driver of domestic demand in the UK.

856

00:46:00,414 --> 00:46:03,234

So if you look at this line, we have the Royal Institute Charted Surveyors.

857

00:46:03,624 --> 00:46:06,564

They look at the prices, the net balance between positive and negative.

858

00:46:06,654 --> 00:46:07,344

Is that the red line?

859

00:46:07,404 --> 00:46:08,184

That's the red line.

860

00:46:08,214 --> 00:46:09,444

Okay. And the blue line?

861

00:46:09,474 --> 00:46:10,704

That's led forward by two quarters.

862

00:46:10,734 --> 00:46:13,644

And the blue line is real household consumption.

863

00:46:13,824 --> 00:46:14,034

Ah.

864

00:46:14,064 --> 00:46:17,814

And what you can see is actually the outlook for real household consumption does

865

00:46:17,994 --> 00:46:21,624

not look that great. If you think about it, if you look at your house, it's a

866

00:46:21,654 --> 00:46:23,334

measure of confidence, a measure of wealth.

867

00:46:23,874 --> 00:46:26,994

And if people don't feel wealthy enough, they're not going to start going out

868

00:46:27,054 --> 00:46:29,634

buying houses and filling it up with IKEA stuff.

869

00:46:29,964 --> 00:46:33,834

So that tells us that the outlook for household consumption does look quite

870

00:46:33,894 --> 00:46:36,804

negative at the moment. And that's a really significant headwind that John Healey

871

00:46:36,804 --> 00:46:37,344

will be looking at.

872

00:46:37,644 --> 00:46:43,446

And that is before, if we were to add to that That's before fiscal drag, which is-

873

00:46:43,506 --> 00:46:44,376

Yeah

874

00:46:44,405 --> 00:46:49,956

... freezing of income tax thresholds, which is a huge driver of tax revenue for

875

00:46:49,986 --> 00:46:50,406

the government.

876

00:46:50,825 --> 00:46:53,976

Yeah. So that's before fiscal drag, and it's before the energy price shock.

877

00:46:54,096 --> 00:46:54,276

Yes.

878

00:46:54,306 --> 00:46:59,466

Which although the Chancellor did have some support, it was 150 quid, whereas

879

00:47:00,276 --> 00:47:00,936

again, I can't-

880

00:47:00,966 --> 00:47:01,476

The whole problem.

881

00:47:01,536 --> 00:47:04,776

I can't predict what the gas price is going to be.

882

00:47:05,376 --> 00:47:10,056

But if you look at people who predict it, the increase in household bills could be

883

00:47:10,086 --> 00:47:10,656

substantial.

884

00:47:10,716 --> 00:47:14,136

Yeah, and Ofgem are going to raise it in January as well, so we do know that one.

885

00:47:14,317 --> 00:47:17,706

And as you're looking at some of those tax offerings that he gave us, it's only

886

00:47:17,766 --> 00:47:19,506

about certain properties bands A to D.

887

00:47:19,596 --> 00:47:21,936

So not everybody gets this, but I think the point here-

888

00:47:21,996 --> 00:47:26,406

Well, I'm told that the website to check what councils-

889

00:47:26,885 --> 00:47:27,036

It crashed.

890

00:47:27,186 --> 00:47:28,356

It went crash, isn't it?

891

00:47:28,416 --> 00:47:28,596

Yeah.

892

00:47:28,626 --> 00:47:31,686

But what this does tell us is that the outlook, including that housing, is not

893

00:47:31,716 --> 00:47:34,836

great for domestic consumption. That's a key headwind for domestic growth.

894

00:47:34,866 --> 00:47:39,246

There is a positive, if I may add in here, and that's really one of the key growth

895

00:47:39,276 --> 00:47:42,456

drivers of the UK has really been around artificial intelligence.

896

00:47:42,516 --> 00:47:45,817

That's really where we've been doing really well, and that keeps growing very, very

897

00:47:45,876 --> 00:47:49,866

strongly indeed. There is a caveat to that, and that is, I live in Loughton, and

898

00:47:50,556 --> 00:47:53,646

NScale were going to develop one of the largest data centers in Loughton.

899

00:47:53,706 --> 00:47:56,976

But I'm not sure if it's the NIMBYs or the Loughton Residents Association that

900

00:47:57,036 --> 00:48:00,966

tried to stop it, but the reality is there wasn't enough electricity, and NScale

901

00:48:01,026 --> 00:48:03,786

said that, so they weren't going to have enough electricity until the 2030s.

902

00:48:03,817 --> 00:48:06,486

So Microsoft, as an anchor investor there, pulled out.

903

00:48:06,936 --> 00:48:10,746

So if we really want to stimulate the UK economy, we need the energy, the

904

00:48:10,776 --> 00:48:15,876

electricity, and dare I say it, being outside Brexit, we're not subject to the

905

00:48:15,906 --> 00:48:19,476

regulations of the EU. In fact, if you look at the UK, it's got the second largest

906

00:48:19,536 --> 00:48:22,177

number of data centers to the US. It's over 700.

907

00:48:22,596 --> 00:48:26,166

So this is an avenue of growth that the UK could exploit, but we need that

908

00:48:26,226 --> 00:48:27,817

electricity to get that over the line.

909

00:48:27,846 --> 00:48:32,646

So I was reading an article, a report by the OECD that suggested that because the

910

00:48:32,797 --> 00:48:36,846

UK is very dominant, the economy is very dominant in services-

911

00:48:36,936 --> 00:48:37,056

Mm-hmm

912

00:48:37,475 --> 00:48:38,197

... and AI- Yeah

913

00:48:38,495 --> 00:48:43,386

... could significantly improve the productivity of services industry, the UK could

914

00:48:43,416 --> 00:48:45,336

be a very large beneficiary-

915

00:48:45,427 --> 00:48:45,576

Exactly

916

00:48:45,635 --> 00:48:46,626

... of the adoption of AI.

917

00:48:47,016 --> 00:48:48,607

But you do need electricity. That's the problem.

918

00:48:48,605 --> 00:48:49,626

But you do need electricity.

919

00:48:51,396 --> 00:48:56,586

You do need electricity. Right. I think it's now time to go to some viewer and

920

00:48:56,646 --> 00:49:02,076

audience questions. Why were banks taxed more while tech profits were

921

00:49:02,136 --> 00:49:05,166

ignored? I'm going to throw that one to you, Daniel.

922

00:49:05,226 --> 00:49:08,016

Well, sure. Which tech companies are we talking about?

923

00:49:08,226 --> 00:49:09,276

Everybody listening to companies-

924

00:49:09,576 --> 00:49:09,817

I think-

925

00:49:10,026 --> 00:49:11,886

The only ones that are easier to tax are the banks, so-

926

00:49:12,246 --> 00:49:15,696

That was it. So that was what Jim O'Neill said, the guy who invented BRICS.

927

00:49:16,026 --> 00:49:19,506

He said taxing banks was the least worst option.

928

00:49:20,166 --> 00:49:23,797

Exactly. It's the least worst option, and I could see the public could see this.

929

00:49:23,856 --> 00:49:26,106

Look, with interest rates going up, the banks would benefit from this.

930

00:49:26,136 --> 00:49:29,166

They do to some degree. And it's the easier option to do.

931

00:49:29,256 --> 00:49:32,317

And they can't tax technology companies because we haven't got any.

932

00:49:33,906 --> 00:49:39,876

Which changes on tax take effect soon, and which are still subject

933

00:49:39,936 --> 00:49:42,486

to further detail or consultation?

934

00:49:42,516 --> 00:49:42,936

Goodness.

935

00:49:43,026 --> 00:49:48,786

So if you're an IFA, which tax changes do they need to be aware of soon, and which

936

00:49:48,936 --> 00:49:49,177

are-

937

00:49:49,266 --> 00:49:49,386

Yeah

938

00:49:49,715 --> 00:49:51,756

... more they can push out doing the research?

939

00:49:51,817 --> 00:49:57,006

Well, most of them are coming in pretty much April next year, as in April 2027.

940

00:49:57,096 --> 00:50:02,586

So the increase to income tax that we talked about on both dividends, interest, and

941

00:50:02,646 --> 00:50:05,496

rental property, they're definitely coming in in April.

942

00:50:05,946 --> 00:50:11,256

We've got the pensions coming into inheritance tax definitely coming in in April.

943

00:50:12,216 --> 00:50:17,136

The things that are subject to consultation but still definitely coming in in April

944

00:50:17,317 --> 00:50:21,636

are this new founders relief, which I can't remember if we've touched on so far.

945

00:50:21,966 --> 00:50:26,856

That's a relief for entrepreneurs, but fairly narrow, and that

946

00:50:27,696 --> 00:50:31,086

probably won't really kick in for a few years, but it does come in in April.

947

00:50:31,506 --> 00:50:37,446

So really, most of the stuff that's been discussed in today's webinar and from

948

00:50:37,716 --> 00:50:41,256

the budget today and last year, if they're not in already, they're coming in in

949

00:50:41,317 --> 00:50:41,856

April.

950

00:50:41,946 --> 00:50:43,956

Okay, so not an awful long time to prepare.

951

00:50:43,986 --> 00:50:45,336

No, there's not. There's not.

952

00:50:45,786 --> 00:50:50,976

And are there implications, tax implications, for clients drawing retirement

953

00:50:51,096 --> 00:50:51,636

income?

954

00:50:52,776 --> 00:50:58,536

There's nothing additional, so they're still going to be

955

00:50:58,626 --> 00:51:04,177

paying their income tax. So the absolute income tax rates have not changed, the

956

00:51:04,356 --> 00:51:07,956

20%, the 40%, the 45%. That hasn't changed.

957

00:51:08,376 --> 00:51:09,096

The-

958

00:51:09,306 --> 00:51:10,476

Now you can take out the tax-free-

959

00:51:10,536 --> 00:51:12,307

None of that's changed.

960

00:51:12,337 --> 00:51:14,226

In fact, there's not been huge amounts of changes.

961

00:51:14,316 --> 00:51:15,756

Not for that side of pensions.

962

00:51:15,816 --> 00:51:19,446

Okay. Any other final words, James? Daniel, sorry.

963

00:51:20,047 --> 00:51:21,096

From the budget, or?

964

00:51:21,726 --> 00:51:23,527

From the budget. What's your sort of final...

965

00:51:24,246 --> 00:51:28,027

My final thoughts is still look to the US because that's really where the growth

966

00:51:28,087 --> 00:51:28,596

comes from.

967

00:51:28,626 --> 00:51:29,256

Said that at the beginning.

968

00:51:29,316 --> 00:51:30,966

Earnings. I said that right at the beginning.

969

00:51:31,027 --> 00:51:33,156

And I would look a lot more at the profit margins.

970

00:51:33,216 --> 00:51:36,186

What we would see from this artificial intelligence, one thing that's different

971

00:51:36,216 --> 00:51:40,177

from the dot-com bubble is they're much more profitable, the tech companies, and we

972

00:51:40,266 --> 00:51:42,216

are starting to see profit margins expanding.

973

00:51:42,486 --> 00:51:46,087

So it does tell us that this AI, a lot of money's been invested into it, and what

974

00:51:46,116 --> 00:51:49,416

the big tech companies are doing, they're optimizing their pricing from this data

975

00:51:49,446 --> 00:51:52,596

that we provide with them. And I think that's one way that they're using to either

976

00:51:52,626 --> 00:51:55,596

control their costs or optimize pricing to boost their profit margin.

977

00:51:55,896 --> 00:51:59,376

Until we see a peaking in that profit margins, I think that this train's got a lot

978

00:51:59,406 --> 00:51:59,856

further to go.

979

00:52:00,066 --> 00:52:01,087

So you're pretty bullish.

980

00:52:01,416 --> 00:52:04,297

I'm bullish on the markets at the moment, certainly on equities, and we like

981

00:52:04,356 --> 00:52:05,466

equities relative to bonds.

982

00:52:05,766 --> 00:52:07,386

Okay. Fair enough. Last comment?

983

00:52:08,076 --> 00:52:12,696

So I think from a tax perspective, when I'm talking to my clients, it's very much

984

00:52:13,206 --> 00:52:18,246

let's look at that later life plan and let's actually do a review.

985

00:52:18,366 --> 00:52:23,226

Let's make sure that we know what we want to do and how we're going to get there,

986

00:52:23,646 --> 00:52:28,837

whether that's... Well, it's both from income or how you're going to fund your

987

00:52:28,896 --> 00:52:34,266

later life, but also it's that generational planning because there's still, for

988

00:52:34,326 --> 00:52:38,466

people that have the excess wealth, are we going to push it down to the generation

989

00:52:38,616 --> 00:52:41,916

sooner rather than later? Which can make a lot of sense.

990

00:52:42,816 --> 00:52:45,277

Or are we going to hold onto a bit more?

991

00:52:45,486 --> 00:52:51,427

But whatever you're going to do, I think this budget really, really says, let's sit

992

00:52:51,516 --> 00:52:56,706

down, let's have a look at it, let's be sensible, let's review what we've got,

993

00:52:56,976 --> 00:52:59,856

let's think it through, and let's be prepared.

994

00:53:00,246 --> 00:53:04,746

Okay. Thank you so much. Well, thank you, therefore, to Rachel and Daniel for

995

00:53:04,807 --> 00:53:08,466

sharing their perspectives. And thank you to everyone who's joined us as well, and

996

00:53:08,496 --> 00:53:10,057

particularly those who sent in questions.

997

00:53:10,445 --> 00:53:14,527

We hope today's discussion has given you a useful perspective on the budget, the

998

00:53:14,587 --> 00:53:18,666

wider investment outlook, and the issues you may want to explore with your clients.

999

00:53:19,116 --> 00:53:23,646

In the coming days, we will be sharing more detail of the assessments of the

1000

00:53:23,736 --> 00:53:27,966

changes. Remember, it takes quite some time to read through those hundreds of pages

1001

00:53:28,027 --> 00:53:33,126

in the Red Book. As always, please speak to your usual Evelyn Partners contact if

1002

00:53:33,156 --> 00:53:35,436

you'd like to discuss anything further.

1003

00:53:35,466 --> 00:53:37,807

And again, thank you very much for joining us. Goodbye.

1004

00:53:38,406 --> 00:53:38,886

Thank you.

1005

00:53:38,916 --> 00:53:39,246

Thank you.