BUDGET - SUMMARY IMPACT

        1. PENSIONS

 

 

           Tax Relief

 

• The good news is that no changes were announced to pension tax relief. Pension saving remains protected from the impact of reforms to salary sacrifice / exchange introduced in 2017 / 2018. The Tapered Annual Allowance remains in place and Finance (No 2) Act 2017 had already confirmed that the previously announced reduction in the Money Purchase Annual Allowance from £10,000 to £4,000 applies from 6 April 2017.
   
   
  Annual Allowance
   

• No changes were announced to the £40,000 standard Annual Allowance.
   
   
  Money Purchase Annual Allowance
   

• The Money Purchase Annual Allowance (MPAA) remains at £4,000.00 for 2018 / 2019.
   
   
  Higher Earners Tapered Annual Allowance
   

• The Tapered Annual Allowance remains in force and will apply to those with both 'adjusted income' of more than £150,000 and 'threshold income' of more than £110,000. It reduces the annual allowance by £1 for every £2 of adjusted income above £150,000 subject to a maximum reduction of £30,000.
   
   
  Lifetime Allowance (LTA)
   
• The Lifetime Allowance increases in line with Consumer Price Index (CPI) inflation to £1,030,000 for 2018 / 2019. 
   
   
   
   
   
   
  2. TAX EFFICIENT INVESTMENTS
   
   
  Lifetime ISA
   
• No changes were announced to the Lifetime ISA (LISA) scheme. Since April 2017, adults aged under 40 have been able to open LISAs. They can save up to £4,000 a year from age 18 to 50, receiving a 25% Government bonus on their contributions. Contributions count towards the ISA limit for 2018 / 2019.
   
   
  ISA
   

• The main ISA subscription limit remains at £20,000 for 2018 / 2019. The subscription limit for Junior ISAs and Child Trust Funds is increasing in line with CPI from £4,128 for 2017 / 2018 to £4,260 for 2018 / 2019.
   
   
  Personal Savings Allowance
   
• The personal savings allowance remains at £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and £0 for additional rate taxpayers for 2018 / 2019.
   
   
   
   
   
  3. DIVIDENDS
   
• As previously announced, the 0% £5,000 a year dividend allowance reduces to £2,000 for 2018 / 2019.
   
• This will result in a tax rise of up to £1,143 from April 2018 for company director/shareholders remunerating themselves via dividends and individuals receiving dividends in excess of £2,000 from investments held outside of ISAs or pensions.
   

• For 2018 / 2019, the rates of tax on dividend income above the allowance are:
   

• 7.5% for basic rate taxpayers
   
• 32.5% for higher rate taxpayers
   
• 38.1% for additional rate taxpayers
   
   
   
   
   
  4. TAX
   

           INCOME TAX

• The income tax personal allowance is increasing from £11,500 in 2017 / 2018 to £11,850 in 2018 / 2019, and the basic rate income tax band is increasing from £33,500 for 2017 / 2018 to £34,500 for 2018 / 2019.
   
• Those entitled to the full standard personal allowance will pay 40% tax on income above £46,350. (These provisions apply to England, Wales and Northern Ireland.)
   
• The Scottish Government used its devolved powers to set the basic rate band at the lower level of £31,500 for Scottish taxpayers in 2017 / 2018. It will publish its Draft Budget for 2018 / 2019 on 14 December 2017.
   
   
  CAPITAL GAINS TAX (CGT)
   

• The capital gains tax annual exempt amount is increasing from £11,300 in 2017 / 2018 to £11,700 in 2018 / 2019.
   

• The Capital Gains Tax rates remain at 10% (basic rate taxpayers) and 20% (higher rate taxpayers) for 2018 / 2019.
   
• These rates do not apply to disposals of residential properties that don’t qualify for private residence relief. These are taxed at 18% and 28%.
   
   
  INHERITANCE TAX (IHT) & TRUSTS
   

• The residence nil-rate band came into effect from April 2017. It applies where the main residence passes on death to direct descendants such as children and grandchildren. It is worth up to £100,000 in 2017 / 2018, £125,000 in 2018 / 2019, £150,000 in 2019 / 2020 and £175,000 in 2020 / 2021 and will then increase in line with CPI indexation.
   
• The nil-rate band is currently frozen at £325,000 until 5 April 2021.
   
• The Inheritance Tax rates remain:
   

• 20% for chargeable lifetime transfers in excess of the available nil-rate band.
• 40% for transfers on death in excess of the available nil-rate band.
• 36% for transfers chargeable on death in excess of the available nil-rate band, where 10% or more of the net estate is left to charity.
   

• Trust taxation - the Government will publish a consultation in 2018 aiming to make the taxation of trusts simpler, fairer and more transparent.
   
   
  CORPORATION TAX
   
• The corporation tax rate remains at 19% for 2018 / 2019. As previously announced, it’s then planned to reduce to 17% from 2020.
   
• The corporate indexation allowance for capital gains will be frozen from January 2018. This means that companies won’t get any relief for inflation from January 2018 to the date of disposal when calculating chargeable gains.
   
   
   
  NATIONAL INSURANCE
   
  Salary Sacrifice

• Most of the tax and National Insurance Contributions (NICs) advantages of salary sacrifice schemes were removed from April 2017 and the protections for many arrangements in place before April 2017 are ending in April 2018. Existing arrangements for cars, accommodation and school fees continue to be protected until April 2021. These changes don’t apply to arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars.
   
  General
• It was announced before the Budget that changes to National Insurance that had been planned to come into effect from April 2018 are delayed to April 2019.This includes the abolition of Class 2 NICs and making all termination payments above £30,000 subject to employer NICs.
   
    
   
  5. OTHER
   
   
  State Pension
   
• From April 2018 the basic state pension available to those who reached state pension age by 5 April 2016 increases to £125.95 per week (£6,549.40 per year) for a single person.
   
• The new state pension for those who reach state pension age from 6 April 2016 increases from April 2018 to £164.35 per week (£8,546.20 per year).
   
   
  Child Benefit
   

• Child benefit for 2018 / 2019 remains frozen at £20.70 per week for the first child and £13.70 per week for each additional child.
   
• A high income child benefit charge continues to apply to taxpayers who have adjusted net income over £50,000 where they or their partner is in receipt of child benefit.
   
• Child benefit is reduced by 1% for every £100 of adjusted net income over £50,000, so the tax charge on those with net adjusted income of £60,000 or more is equal to the amount of child benefit paid.
   
  
  
   
  Disclaimer
   
  Every care has been taken to ensure that this information is correct and in accordance with our understanding of the law and HM Revenue & Customs practice, which may change. However, independent confirmation should be obtained before acting or refraining from acting in reliance upon the information given. This information is based on announcements made in the November 2017 Budget which may change before becoming law.
  
  

Budget Bore

Despite beginning with such enthusiasm, fanfare and trumpeting and a killer opening line of “a Budget for a future that will be full of change, full of new challenges and full of opportunity”, Philip Hammond offered very little in the way of revolutionary policies to ignite a nation, an economy or anything else for that matter.

 

Having said that, he showed guts and humour (in the loosest sense) in the face of what many have called the “impossible budget” given the uncertainty that leaving the EU will bring. Add a ‘Boring Budget’ to the list of things we can blame Brexit for! Perhaps, just perhaps, a boring Budget was exactly what we needed given the uncertainty of leaving the EU in March 2019. Perhaps.  

 

Despite the bore of the detail, headlines will still be written, media will still gorge on the carcass and politicians will spin the messages for as long as they can stretch it out.

 

Here are your top take away headlines from the Budget and some commentary you can actually trust!

 

 

Housing

“Complex challenges and no magic bullet” was used to summarise the current housing crisis and a series of measures are to be introduced.

 

Stamp duty to be abolished immediately for first-time buyers purchasing properties worth up to £300,000

 

£44 billion in Government support over the next 5 years by way of capital funding, loans and guarantees.

 

 

Alcohol & Transport

Fuel duty rise for petrol and diesel cars scheduled for April 2018 scrapped.

 

Duty on beer, wine, spirits and most ciders will be frozen.

 

Vehicle excise duty for diesel cars that do not meet latest standards to rise by one band in April 2018.

 

26 – 30 years olds will be entitled to a new railcard to gain 1/3^rd off rail travel.

 

 

Income Tax

The tax free personal allowance to rise from £11,500 to £11,850 from April 2018.

 

Higher rate tax threshold to increase from £45,000 to £46,350 from April 2018.

 

 

Economy

Growth forecasts for the next 5 years have been significantly downgraded from the March 2017 predictions by the independent Office for Budget Responsibility.

 

The GDP growth forecast for 2017 downgraded from 2.0% to 1.5%.

 

GDP also downgraded to 1.4%, 1.3% and 1.5% in subsequent years before rising to 1.6% in 2021 / 2022.

 

 

Brexit

£700 million has been invested in Brexit preparations so far.

 

A further £3 billion is to be set aside over the next 2 years to prepare the UK for “every possible outcome” as it leaves the EU.

 

 

Public Borrowing, Deficit and Spending

The annual borrowing of £49.9 billion this year will be £8.4 billion lower than forecast in March 2017.

 

The borrowing forecast is to fall in every subsequent year from £39.5 billion in 2018 / 2019 to £25.6 billion by 2022 / 2023.

 

 

Business

VAT threshold for small business to remain at £85,000 for the next 2 years.

 

£500 million is to be made available for 5G mobile networks, fibre broadband and artificial intelligence.

 

£540 million is to be invested to support the growth of electric cars, including more charging points

 

The rise in business rates to be pegged to a CPI measure of inflation (not RPI).

 

 

NHS

£2.8 billion to be made available for extra funding for the NHS in England.

 

£10 billion capital investment fund for hospitals.

 

 

North East

£320m to be invested in the former Redcar steelworks site.

 

£300 million to be invested in the NE Tyne Metro system to replace 40 year old infrastructure.

 

A Right Royal Tax Avoidance

The hot topic of the past week (aside from Priti Patel) has been the revelations in the ‘Paradise Papers’, which were a huge leak of financial documents obtained by the German newspaper Süddeutsche Zeitungthat (try saying that after a couple of cold Bavarian ‘refreshments’) that throw light on the top end of the world of offshore finance……where companies and individuals register offshore to avoid UK tax and pay far lower local tax in which they are registered.

 

There have been plenty of tabloid headlines that don’t need regurgitating here……from Apple avoiding tax in the Channel Islands to Lewis Hamilton avoiding VAT on his private jet to a Lithuanian shopping mall partly owned by U2 star Bono……and plenty in between.

 

Tax avoidance is what it is……the wealthy avoiding paying the going rate of UK tax by using law loop holes, offshore companies, trusts, etc. etc. It’s gone on for ever and it will continue to go on. The difference now in comparison to 10 or 20 years ago is that more and more of the stories are being leaked.   

 

To be honest, I am ‘amblivious’ to the subject. We all live by our own moral compass and we are the greater judge of our own actions.

 

Well, that was until I read about members of the Royal Family.  

 

Prince Charles campaigned to alter climate change agreements after his private estate (Duchy of Cornwall) had purchased shares in a company offshore with a financial interest in what he was promoting. The Paradise Papers show the Duchy of Cornwall in 2007 secretly bought shares in a Bermuda company that would benefit from a rule change. Conflict of interest I hear you say? Surely not!

 

In addition, the Queen’s estate (Duchy of Lancaster) has around £10 million invested offshore in the Cayman Islands and Bermuda.  

 

And that’s got me angry. I have voiced my concerns as recently as last month about the lack of transparency with MPs and their business dealings http://stevesmithlive.blogspot.co.uk/2017/10/intended-or-unintended-consequences.html

as well as the lack of reporting to the public in an easy to understand manner. Does this really now need to be extended to the Royal Family also? Is that how far we have now come?

 

We live in an age of mistrust of the leaders in this country and this fragments and polarises. Yet, the more transparent our leaders are……the more we trust and believe in their actions……the more we will embrace their decisions and support the movement.

 

Or we could just continue as we are.

Interesting Times

In an apparent show of economic strength, Bank of England Governor Mark Carney and his team of merry men have raised interest rates from 0.25% to 0.50%......the first interest rate rise for 10 years.

 

Those at the coalface will feel it the most……the main losers will be the households with a variable rate mortgage with almost four million households facing higher mortgage interest payments after the rise. Conversely, many of the country's 45 million savers should see a ‘modest’ lift in their returns. Modest being the key word here.

 

Much has been made of the higher mortgage costs for many, but consider this……the average outstanding mortgage balance is £89,000 which would see payments increase by about £12 a month.

 

This interest rate rise is not the issue……it is the general trend, direction of movement and dialog coming from the Bank of England that suggest more rises are on the way over the next 3 years. Not crazy increases but enough multiples of £12 a month to cause many to look twice. We have a generation of homeowners who only know low interest rates…….and this is without taking into consideration the impact on car loans, credit cards, personal loans, et al.

A show of economic strength? Probably not……more a reversal of the interest rate cut from August 2016, which was widely regarded as unnecessary.

 

All of this (obviously) comes with the small print of ‘BREXIT’……which is the biggest variable that will cause economic interest rate policy to go up, down or sideways. In reality, the direction will be decided in due course…..perhaps. Maybe.

 

Let’s wait and see.