Monthly Archives: March 2016

Dividend Tax Changes And Trusts

shutterstock_20506853Proposed new tax rates on dividends, due to come into force next week on 6 April will mean trustees of discretionary trusts may have to give some thought to how they hold investments, distribute to beneficiaries and account for the tax due.

Thousands of trusts exist in the UK and many hold investments in equities – either direct shareholdings or via mutual funds.

Currently, dividends paid on investments held within a trust come with a notional 10% tax credit leaving trustees with an effective tax rate of 30.56%.

From April, the non-reclaimable 10% dividend tax credit has been scrapped and, unlike individuals, trusts do not get the new tax free dividend allowance of £5,000 per annum.   For trusts, dividends received within the £1,000 starting band will be taxed at 7.5%; and dividends in excess of this will be taxed at the increased rate of 38.1%. The combined result of these changes is that trustees will be 10.8% worse off on accumulated income.

Previously, when beneficiaries received distributions they have been able to recover the difference between the tax withheld and their marginal rate.  Whilst beneficiaries receiving distributions will be in the same position as before in this regard, they will not be able to use their personal dividend allowance, as they will be receiving trust income and not dividend income.  They will therefore lose out.

So what can be done?

Where there is a need to distribute income on a regular basis, a solution could be to create revocable life interests and mandate income directly to beneficiaries to allow direct receipt of dividends personally and use of personal dividend allowances.

Where income is not required regularly an alternative could be to use investment bonds. They have a number of advantages:

  • they are a non-income producing asset;
  • they allow annual 5% tax-deferred withdrawals;
  • they have the ability to be assigned to a lower tax rate beneficiary;
  • no ongoing tax liability or tax return until a chargeable event occurs; and
  • if the settlor is still alive, any tax is at the settlor’s marginal rate not the trustees.

HMRC have confirmed that dividend income received by life company funds will continue to be exempt from tax.

Trustees do have a fundamental duty of care to act in the best interests of all beneficiaries. The Trustee Act 2000 introduced a number of new duties on trustees to obtain and consider proper advice when making or reviewing investments and that should also include any taxation changes.

For more information on trust tax or trust investments please contact Julie Walsh (Tax) at or Richard Hesketh (Investments) at or call 01254 679131.

PM+M Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.


The Budget Now The Dust Has Settled

shutterstock_343024226Now that the dust has settled on last week’s Budget and the immediate storm surrounding disability benefits has subsided, here is a quick round up of the key points from a tax and financial planning perspective:

  • A new lifetime ISA will be available from April 2017 for adults under the age of 40 to save up to £4,000 per year with a 25% contribution from the Government making it equivalent to basic rate tax relief on the amounts saved.
  • New dividend tax rates and personal allowances take effect on 6 April.  These provide a £5,000 tax free allowance per person but then an across the board 7.5% tax increase on any dividends over and above that amount.
  • Capital gains tax rates reduce to 20% on 6 April (or 10% for basic rate tax payers).
  • Entrepreneurs’ Relief – with its 10% capital gains tax rate – is extended to external investors in unquoted trading companies for new share capital subscribed post Budget day and owned for at least 3 years.
  • Corporation tax rates, set to reduce from 20% to 19% in April 2017, will reduce further to 17% in April 2020 and new rules will be introduced in 2017 to allow more flexibility in the use of brought forward trading losses.
  • A major revamp of business rates, permanently doubling the small business rate relief.
  • A new banded system of stamp duty land tax on commercial property, mirroring the residential property changes introduced last year.
  • A package of measures aimed at the residential buy to let sector, including a 3% stamp duty land tax supplementary charge from 1 April this year and changes to the deduction for interest payments from 6 April 2017.

With this Budget, plus the extensive range of measures previously announced and taking effect now, we are currently experiencing one of the most complex periods of change in tax legislation in recent history, making it more and more difficult to plan with certainty.  With the prospect of a post EU referendum emergency Budget in the Summer, it does not seem likely that tax is going to get simpler any time soon.

PM+M Host Successful Round Table Event

Following the Chancellor’s budget speech on 16 March, eight guests joined Jane Parry, David Gorton, Antony Keen and Helen Binns for PM+M’s very first round table event. The event successfully brought together business owners, a Council Executive and prominent members of the East Lancashire business community. Amongst guests were Brian Bailey (Blackburn Council), Mike Cheston (Blackburn Rovers Football Club), Caroline James (Trevor Dawson), Richard Slater (Fettle PR), Jason Gledhill (HSBC) and Jenny Burke (Forbes Solicitors).

In our summary video, David Gorton, Jason Gledhill and Mike Cheston give their views on how the Budget will affect Lancashire businesses.

Also, you can view the full commentary of the Budget by clicking the button below.


Following this successful event, PM+M now plan to host a series of roundtables on a wide range of topics. The next one is planned for immediately after the EU Referendum result is announced and is entitled “Where next for Britain?”. If you would like to register your interest in attending this or other future events, please email

Jane Parry, Managing Partner & Head Of Tax At PM+M, Responds To The Budget

Autumn Statement 2015With the EU Referendum only months away, it wasn’t much of surprise that this Budget was relatively non-eventful as far as middle England is concerned, with the Chancellor was obviously keen to not offend – or rile – either side of the divide.
I think it’s fair to say that it was more about tax tinkering, rather than it being a career defining Budget. The changes to the tax thresholds for low and middle earners are without doubt crowd pleasers and will help.

In our view, this Budget has certainly made things more complicated for business owners; especially if you consider the changes made to dividends last year and coming into effect in April.

As regards Capital Gains Tax, his headline announcement that it will drop to 20% (and 10% for basic payers) sounded great but there was also a lot of complexity introduced, with different rates for residential property and carried interest.  There were some welcome amendments to Entrepreneurs’ Relief, some of which were undoing the overly tough measures he introduced last year, but some genuinely widening the relief to non employee investors in unquoted companies – a welcome boost for business investors.

The Chancellor also reinforced his attack on buy to let investors.  Rather than backing away from the 3% stamp duty land tax surcharge he confirmed it and widened it to include larger investors.

The introduction of commercial property Stamp duty land tax banding is welcomed and echoes the change made for residential property last year.  It will help the bottom to middle end of the commercial property market just as it did in the residential sector, so that can be applauded. The flip side to that is that larger commercial properties costing more than £1m just became more expensive.

This followed the news that the threshold for small business rate relief  will rise from £6,000 to 15,000; again, it’s great news but only if his prediction that half of all UK businesses will either see a fall in how much they pay or will pay nothing at all.

Changes to Corporation Tax were widely expected.  The Chancellor is trying to tread the fine line between making the UK attractive as a base for global businesses whilst making sure that those businesses actually pay a fair amount of tax in the UK.  A range of measures to do this, along with a further planned reduction in the rate of corporation tax to 17% by 2020 should go a long way towards that.  It will also be interesting to see how the changes will affect medium sized companies over the coming years, as that remains unclear and there is a danger that the reduced tax rate becomes outweighed by the burden of ever increasing complexity of the tax compliance burden for those businesses.

The news that the ISA limit will rise to £20,000 is positive as is the launch of the Lifetime ISA. They should, in theory, encourage young people to save. But my gut feeling is that this is the introduction of pensions ISA’s by another name and possibly another step towards the lump sum ultimately being abolished. Time will, however, tell.

The devolution of power to local government has been a cornerstone of Conservative policy for a while. George Osborne’s announcement that local authorities will be responsible for collecting rates but not setting them seems somewhat strange; especially when you look at the challenges around local fundraising including a potential drain of young talent to London/ the South East and an ageing legacy population that will need to be paid for.

Infrastructure and the Northern Powerhouse were the other two things that jumped out. The green light for HS3, a four-lane M62, a potential tunnel between Manchester and Sheffield to better connect the North West together with increases in flood defences should all be welcomed. All are long term projects, so need to be treated with cautious optimism.

To sum up, this Budget didn’t contain any major shocks and the Chancellor’s chants of low unemployment, the importance of staying in the EU and the fact that Great Britain has grown faster than any other major advanced economy this year were no surprise.

I think we’ll see a bolder Budget post 23rd June.

To view the full Budget commentary, please click the button below.


Jane Parry – Managing Partner & Head of Tax

The Budget 2016 – What Should We Be Expecting?

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With the Chancellor set to make his announcements next week, we are wondering what he may have up his sleeve. What we do know is the next stage of the pensions revolution has been cancelled it seems, or at least postponed.

We do not know what the Chancellor will have up his sleeve for us next week, but we can expect some significant tax changes and we haven’t entirely ruled out further changes to pensions.

We will be hosting our annual Budget seminars this year and details can be found below:


If you would like to attend one of our seminars, please book by clicking the button below or by calling 01254 679131.


We will also have all the key points from George Osborne’s Budget announcements on our blog on the afternoon of Budget day (16 March), followed by a full detailed commentary the day after.


Investing – Are You Ready?


With interest rates at an historic low, cash in the bank is currently earning next to nothing.  Meanwhile, life expectancy is continuously rising and the retirement window is growing, leaving many people with the need to maximise their savings and their retirement pots. You know you need to invest but these are uncertain times.  The threat of Brexit, a fall in oil prices, election time in the USA and economic difficulties in emerging markets all add up to a worrying and confusing picture.

The experienced team at PM+M have guided clients through a number of economic cycles and can give you tried and tested strategies to get your investment strategy right.

So join us at our seminar on Wednesday 26 March at Bertram’s Restaurant in Burnley and we’ll show you how you can efficiently plan your investments to create greater financial security and give you peace of mind. To book, please click the button below or call the marketing team on 01254 679131.



PM+M Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.