Top Rated Adviser’s 2020

This month two Buckingham Gate Chartered Financial Planners have made it into VouchedFor’s Top Rated Adviser Guide for 2020.

The guide is distributed nationally in The Times and digitally through the Telegraph’s website and so this is a great achievement that Buckingham Gate are tremendously proud of.

Congratulations Matthew Smith and Peter Ditchburn for receiving such well-deserved recognition for the fantastic advice you provide to your clients.

What makes their inclusion in the guide so much more special, is knowing that it was thanks to their lovely clients for leaving such powerful reviews on VouchedFor.

VouchedFor is a leading review site for Financial Advisers and helps those looking for advice, find the right adviser for them.

Our unique combination of expertise, makes us a one stop shop for your retirement, investment and estate planning needs.

Matthew and Peter would like to say a huge thank you to their clients for taking the time to leave a review, it really means a lot to them.

If you’re looking for financial advice, you would definitely be in good hands with these two!

The Only Constant Is Change

If you are anything like me, you will have been fascinated by the seemingly never-ending political surprises over the past few days, not least Boris Johnson’s decision to prorogue parliament.
All of this would make for fantastic watching if it were a political TV drama, but unfortunately it is real life.
In some people’s minds, Mr Johnson’s actions have made a general election more likely and by extension the prospect of a labour government more likely as well.
Many will use these potential changes on the horizon as an excuse not to take action on something. Not to invest. Not to get that updated will drawn up. No to [insert any other thing you might want to do here].
Although potential changes are always unsettling, it is important not to use them as an excuse for inaction. Because, the thing is, once one change has happened, there will always be another one on the horizon.
If we have a general election this year, who’s to say that there wont be one next year? (and in the current political climate, I wouldn’t bet against it). Once we have had this years budget, there will be the Spring statement and then next years budget.
There will always be changes on the horizon, but at some point we must act if we want to achieve anything.
I always say to clients that we must plan based on what we know today and then adapt and change the plan in the future when the inevitable changes happen!

Office Of Tax Simplification IHT Review – Some Interesting Insights

There were a few interesting insights to be gleaned from the OTS Inheritance Tax Review, in addition to the much-covered suggestions for changes to the IHT regime.

First is the seemingly profound under-use of the ‘gifts from regular income exemption’. We have often made the point that this is the most underutilised and misunderstood IHT exemption and figures from the OTS seem to confirm this point.

In the 15/16 tax year, there were only 579 claims in total for the gifts from income exemption with well over half of these claims being for less than £25,000.

As such, it could be argued that there is a huge missed opportunity out there for additional IHT savings, without the hassle of the 7-year rule. Of course, the OTS has made some suggestions to abolish the gifts from income exemption, but for now it lives on and it might be wise to make hay while the sun shines.

Another notable point raised in the review is the fact that of the estates that paid IHT in the 15/16 year, only 20% had any form of lifetime gifting within the 7-year cycle.

Now of course in some cases, this would simply have been unaffordable, however surely there are a host of missed opportunities for IHT savings in the 80% of estates which had engaged in no gifting at all.

Trust Tax Consultation – Nothing To See Here (Yet)

Please forgive the unusually technical nature of my blog today, but this is an issue that impacts on many of our clients and potential clients – trust taxation.

Many people would have seen the media reports about the consultation that HMRC has launched on the taxation of trusts (among other issues I might add).

The consultation is focusing on the taxation of trusts, their operation and administration and also checking that the treatment of trusts is fair and equitable when taken together with the other possible methods of estate planning.

In principle, none of this is a bad thing.

My Good Friends – The Media

Now as you might expect, the media have vastly over-done the potential impact of this consultation. Some headlines have declared that ‘IHT trusts will be stripped of their tax advantages’.

This makes for a good headline (and no doubt draws readers and traffic to websites to drive ad revenue), but is it actually true?

Well, as with any consultation, the strict answer is – we don’t know.

A consultation is just that, a consultation.

HMRC are seeking input and ideas on some of the questions posed by the consultation.

What we can glean from the questions though is the direction of travel and nothing in the consultation document itself (unlike some of the media commentators, I actually saw fit to read the whole document before making prophecies of doom) has given me major cause for concern at this time.

First of all, many consultations result in no change at all. Either the consultation does not deliver a viable alternative to the status quo, or the whole things just loses steam and falls off the radar. This has happened countless times before.

But, even if we do see action, I think much of it could be positive.

The consultation document first talks about simplifying the taxation of trusts (nothing about the rates here, just the operation). This would be incredibly welcome given the current complexities of accounting for income tax, capital gains tax and inheritance tax across the settlors, the trustees and the beneficiaries of a trust.

Three different taxes accounted for across three different groups of people can and does get messy sometimes and any simplification to this system will do nothing to harm the appeal of trusts.

The document also talks about the fact that the 20% entry charge on gifts into trusts could be perceived as unfair when compared to the unlimited potential gifts we can make to other people.

Although nothing is certain, the language here hints to me that HMRC could be playing with the idea of removing this charge which would again be most welcome.

The only potential downside is that there is hints of an increase to the 6% periodic charge. While this would be unwelcome, it would also be relatively un-important for the majority of our clients on the basis that we usually manage trusts to be below the nil rate band allowance, meaning that no tax is due in any case, regardless of the rate.

The consultation document recognises the benefits of trusts in financial planning and in society and so I don’t see any prospects of trusts being ‘outlawed’ (again, contrary to some headlines you may stumble across).

As with many things, ‘wait and see’ will be the best approach here.

Firstly, the consultation may come to nothing, in which case, no action will be required.

Second, the consultation could provide benefits to trust planning, in which case we will look at how we can take advantage.

And, if we do see any negative changes, we will analyse them and plan around them, just like we have planned around numerous negative tax changes before and no doubt will again in the future.

Despite the headlines, I don’t believe that the consultation (in its current form) is particularly dangerous.

Taking action based on sensationalist headlines on the other hand – well that could prove very dangerous indeed.

The Complexity Conundrum

As I had a conversation with a client today, I came to realise just how complex some areas of legislation have become in recent years.

It seems that there is a trend for adding new elements to existing legislation or ‘retro-fitting’ old rules to fit current circumstances.

The problem with both approaches, is that it leads to rules that are confusing and complex and which are often not really fit for purpose.

A great example is Inheritance Tax. Where as before, we had the ‘usual’ £325,000 nil rate band which I think many people had become reasonably comfortable with, we now have the new ‘Residential Nil Rate Band’ which is a great example of things being bolted onto existing legislation.

This new allowance looks innocent enough on the surface – a further £175,000 of IHT exempt assets sounds good to most people – however when you start to dig a bit deeper, things are not quite what they seem.

For a start, the new allowance only applies to a select number of people, namely those who own a home worth more than £350,000 (as a couple, £175,000 for a single person) and whom have children. This alone rules out a reasonably large portion of the population. Add in the fact that the allowance starts to taper down on a 2:1 basis when your estate exceeds £2m and many types of trusts commonly in wills are also excluded from claiming this allowance, and we end up in a situation where it is thought only around 5% of the population will be eligible to claim. There are many other nuances which are beyond the scope of this article, but which muddy the water even further.

Now on the one hand, you could argue that this is a political masterstroke – the government achieved the headlines of a £1 million IHT allowance and the media seemed happy. On the other hand however, it has introduced a huge amount of additional complexity into what was already a far from simple area of financial planning.

Perhaps one day policy makers will realise that sometimes it really is better to rip up the existing rule book and start again – then again they may not!

Until then, we will do our very best to cut through the complexity on behalf of our clients’ and to present solutions which are as clear and easy to understand as possible.


Residential Nil Rate Band – Planning actions for estates worth more than £2,000,000

Those with estates worth over £2,000,000 will begin to lose out on the new Residential Nil Rate Band. The new allowance is ‘tapered’ away at a rate of £1 for every £2 that your estate is over £2,000,000.

For example, if your estate was worth £2.1m, you would lose £50,000 of the new Residential Nil Rate Band.

While this is clearly unwelcome news for those with larger estates, it does present some significant planning opportunities.

For example, if a couple had an estate worth £2.2m, they would lose £100,000 of their Residential Nil Rate Band, increasing their inheritance tax bill by £40,000.

If considered planning via trusts or qualifying investments was used to bring the estate back under £2m, not only would the £200,000 excess be outside of the estate for tax purposes, but the full Residential Nil Rate bade could be re-claimed.

Estates of this size should also consider other estate planning and succession actions to ensure that the maximum value can be passed down to future generations.

Our estate planning seminars cover all of the topics outlined above, as well as some other innovative methods by which you can preserve and protect your estate. The events are free to attend and you can book your place here.

Residential Nil Rate Band – Planning actions for estates worth more than £500,000 (unmarried) or £1,000,000 (Married), but less than £2,000,000

People in this category stand to gain significantly from the new legislation, however careful planning is required to ensure that you gain the maximum benefit.

Estates of this size are likely to be facing an inheritance tax liability, despite the introduction of the Residential Nil Rate Band, however this should be significantly reduced.

Some wills created historically contained what is known as a ‘nil rate band’ trust. The use of this type of trust has the potential to cause the Residential Nil Rate Band to be lost, as the transfer of the assets would be to the trust and not to direct descendants. It would be good practice to review you will for the presence of a nil rate band trust.

Your direct descendants (i.e children or grandchildren) will need to be the ones who inherit the residential home to qualify for the new relief. Does your current will meet these criteria?

Consideration should be given to other inheritance tax planning actions that could reduce the inheritance tax liability further or eliminate it altogether. This could include the use of lifetime trusts or qualifying investments.

Our estate planning seminars cover all of the above topics in detail and are free to attend. You can book your place here.

Residential Nil Rate Band – Planning actions for estates worth more than £325,000 but less than £500,000 (unmarried) or more than £650,000 but less than £1,000,000 (married couple)

People in this bracket are well placed to make full use of the new Residential Nil Rate Band, so long as the correct planning is put in place.

In effect, people in this category who own a residential home worth at least £175,000 (unmarried) or £350,000 (married couple) and who have children, should be in a position to pass their estate down to their direct descendants with no inheritance tax to pay.

There are however, a number of potential pitfalls to look out for as follows:

Some wills created historically contained what is known as a ‘nil rate band’ trust. The use of this type of trust has the potential to cause the Residential Nil Rate Band to be lost, as the transfer of the assets would be to the trust and not to direct descendants. It would be good practice to review you will for the presence of a nil rate band trust.

Your direct descendants (i.e children or grandchildren) will need to be the ones who inherit the residential home to qualify for the new relief. Does your current will meet these criteria?

We are running a series of free estate planning seminars where you can learn more about the new Residential Nil Rate Band and how to avoid some common mistakes.

Residential Nil Rate Band – Planning Actions for Estates Worth Less Than £325,000 (unmarried) or £650,000 (married couple)

The introduction of the new Residential Nil Rate Band is unlikely to effect people in this bracket, so long as the estate is forecast to remain below these limits (which have now been frozen again until at least 2021) for the foreseeable future.

For those who are expecting their estate to increase over and above these limits, additional planning may be required. We would suggest that you attend one of our free estate planning seminars to learn more about the Residential Nil Rate Band and how to avoid some common mistakes.

As a matter of course, it is good practice to review your will every 5 years or so to ensure that it fully reflects your wishes and remains up to date with current legislation.

People in this category may still wish to consider the use of trusts to protect their family assets, despite the absence of large tax advantages.