Bespoke – Grant Thornton

OF INTEREST
2
BUDGET 2009
High net worth individuals
were heavily targeted in this
year’s Budget with higher
taxes, reduced personal
allowances and restricted
pension relief. Francesca
Lagerberg and Lindsey Wicks
of Grant Thornton investigate
the details:
■ CHANCELLOR ALISTAIR
Darling exceeded expectations by
introducing a‘super-tax’ rate of 50%
for earnings over £150,000, to come into
effect from 6April 2010. This was both
higher and sooner than predicted, and,
incorporating national insurance
contribution increases scheduled from
April 2011, the tax rate will be 51.5% for
employees on income over £150,000.
■ APRILNEXTYEAR will also
see atapering away of personal allowances
for anyone with asix-figure income.
At an income of £112,950 you will have
no personal allowance (currently £6,475).
There are likely to be PAYE operational
problems for many and to add to the
confusion, those with incomes falling
between £100,000 and £112,950 will pay
an effective tax rate of 60%. Those with
income of £110,000 could theoretically
see their total tax bill rising by 5% in three
years. In the case of earners of £180,000,
the increase could be nearly 9%!
■ IN TWOYEARS’ time the
amount of tax relief available for pension
savings will be down from 50% to 20%
for those earning between £150,000 and
£180,000. Incomes above this will only
qualify for relief at the basic rate. There
is an anti-forestalling provision in place
to prevent pension alterations before
then, atax charge of 20% of ‘additional’
contributions in excess of the special
annual allowance of £20,000. Regular
51.5%
The tax rate on income over
£150,000 for employees as of
April 2011
ongoing pension savings in place before
22 April 2009 are unaffected.
■ ALSO FROM 6APRIL 2010
there will be three rates of tax on dividend
income. Where income falls within the
basic rate band, the 10% tax credit will
extinguish any liability, as before. The
equivalent rate for 40% taxpayers remains
at 32.5% but anew rate of 42.5% will be
introduced where income will be taxed at
the new super-tax rate of 50%. Trusts of
course are not left alone. From the same
date the additional rate of tax for trusts
will also rise to 50%, with anew higher
trust rate of tax on dividends of 42.5%.
■ THEONLYREALGOOD news
for savers is that the ISA limit is raised
from £7,200 to £10,200; however,those
under 50 will have to wait until 2010 for
this benefit.
CREDIT
CRUNCH
HITS DIVORCE
‘The financial carve-up that
follows adivorce settlement
will be at the forefront of a
couple’s mind.’
AGRANTTHORNTON survey
among 70 leading matrimonial lawyers
reveals that nearly half expect the credit
crunch to result in fewer divorces reaching
the courts. While money trouble is a
well-documented cause of tension between
spouses, it could be that some couples stay
together because of their financial situation.
Robert Kerr,partner at Grant Thornton’s
Forensic and Investigation Services
practice, says: ‘The financial carve-up
that follows adivorce settlement will be
at the forefront of acouple’smind.’
He cites the prominent case of the
hedge fund manager Brian Myerson, who
agreed to give his wife a£9.5 million
divorce settlement only to see his personal
wealth suddenly fall dramatically.Many
other individuals of high net worth could
find themselves similarly vulnerable.
Clean break settlements (also known as
‘lump sum financial agreements’) are likely
to decline, with acorresponding increase
in maintenance-based divorces, according
to 65% of lawyers. This is not surprising,
says Kerr,given that ‘individuals’ assets
will be falling in value in the current
economic climate, thus reducing the pot
of wealth for the parties to share’.
52% of responding lawyers
predict that there will be an
increase in pre- and post-nuptial
agreements due to the
economic slowdown.
‘Pre-nups have become increasingly
more popular as people are looking to
secure the wealth that they have
accumulated prior to their marriage,’ says
Kerr.‘Therefore, it is no surprise in an
economic climate where individuals’
income levels will be fluctuating that they
would like more guarantees over their
finances. The recent case of German
heiress Katrin Radmacher taking her
husband Nicolas Granatino to court to
uphold apre-nuptial agreement so that
she could protect her wealth is afurther
example of the uncertainty around
pre-nups and the call by many to
make them legally binding.’
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