Perspective News

Having enjoyed a significant hike in last year’s Budget and their increase for 2011/12 already confirmed, ISA allowances were unlikely to see any secific changes in this Budget. However, their future will be impacted by the decision to increase allowances with reference to the Consumer Prices Index rather than the Retail Price Index. As the former has historically been lower, this may limit year-on-year rises. IN the meantime, however, the rise for April remains intact and investors will be able to shelter £10,680 in an Isa in the 2011/12 tax year.

Junior Isas were meanwhile, put firmly on the legislative agenda and will be introduced in the 2011 Finance Bill. An outline of the structure of the new wrapper is likely to emerge shortly but they are expected to have many of the tax incentives of the old Child Trust Funds, only, like current ‘adult’ Isas, without the government contributions. Junior Isas are expected to be available from autumn 2011.

Enterprise Investment Schemes (EISs) and venture capital trusts (VCTs) also saw some changes. For EISs, initial income tax relief was increased from 20% to 30% from April of this year. From April 2012, there will changes to the rules on allowable companies for both EISs and VCTs. Allowances had been pared back in recent years so these changes go some way to reverse the effects of that.

Both schemes will now be able invest in businesses with up to 250 employees (from a previous limit of 50 employees). The limit on the gross assets of investable companies will also rise, to £15m from £7m. Schemes will now be able to invest up to £10m in one business, up from £2m at present.

Other proposals to be introduced in the Finance Bill would remove limits on how much an investment trust can invest in any one company and permit these vehicles to make greater use of derivatives. Investment trusts currently have some restrictions on how they derive income and these would also be removed. The government is consulting on real estate investment trusts to decrease the regulatory burden, with any agreed changes then being implemented in the 2012/13 tax year.

The other main consideration for investors is the surprise “windfall” tax on the oil sector. Depending on whether oil companies can pass this on to the consumer (which the Chancellor suggested he would not tolerate), this could represent a drain on profits for some of the largest companies in the UK. On Budget day, however, the share prices for these oil giants were unmoved, suggesting the markets believe these companies can easily weather the storm.

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