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.