Recently, the UK voted to leave the EU (Brexit) by margin of 52% to 48%. Considering the depth of the UK’s integration with the EU, you may be wondering how this will affect your financial situation. Prestige Tax and Trust Services asks: how will Brexit affect your taxes and pension?
Commenting to City A.M. Head of Private Wealth at chartered accountants Saffery Champness, James Hender said: “It’s important to remember that a large proportion of our taxes are entirely domestic in nature, and Brexit by itself won’t change any of these… Some taxes are, though, EU driven… and how these are amended or erased will be key.”
Also speaking out on this issue, Saffery Champness Partner Lucy Brennan noted: “It is far too early to say how Britain’s existing commitment to international tax agreements – both in terms of corporate tax and the drive for increased transparency and effective policing – will be affected.”
Brexit and taxes
However, the BBC explains that according to The Institute of Fiscal Studies, the government may be forced to extend austerity past 2020 due to Brexit. This means that Whitehall would continue limiting spending and this could affect how much tax you are required to pay to HM Revenue and Customs.
Speaking before the vote, UK Chancellor George Osborne suggested that a vote to leave the EU could add 2p to the basic tax rate and 3p to the higher tax rate. He also indicated that inheritance tax could increase from 40p per pound to 45p per pound. It is unclear at present how the Leave campaign’s suggestion that the EU’s mandatory 5% VAT tax on domestic fuel could be removed in the event of a Brexit will be implemented.
Brexit and pensions
UK Prime Minister David Cameron also suggested that a Brexit could threaten the nation’s “triple lock” system for state pension. This refers to the agreement which mandates that state pensions rise by whichever is highest; 2.5% per year, inflation, or the rate of average earnings for UK workers.
This assumes that the UK would see a poorer economy due to Brexit. If this occurs, the Bank of England may decide to further reduce interest rates by implementing a quantitative easing programme and this could lower bond yields. In turn, this would reduce annuity rates, meaning that if you take out a personal annuity you could get less pension income to live off from your savings.
Prestige Tax and Trust Services
At this point, it is unclear how Brexit will affect your taxes. However, economic experts and government officials have suggested that in some way, the UK’s decision to leave the EU could somehow impact your tax obligations and pension savings. You may want to prepare for this eventuality, so your finances are protected going forward. The Prestige Tax and Trust Services team possess the knowledge and expertise you need to navigate these matters effectively.