2018 Autumn Budget Reaction:
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Monday 29th October saw an Autumn Budget that was anticipated to be both the ‘Brexit budget’ and the ‘Post-Austerity budget’.
In light of an optimistic outlook from the OBR (Office for Budget Responsibility) there were signs of a relaxation on government spending restrictions, with many public sector areas receiving top-ups to their budgets ahead of next years Spending Review. However, away from the main headlines there was not too much to talk about. |
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The key headlines for personal finance matters are highlighted below:
Income Tax:
The big ‘rabbit out of the hat’ for personal finances was the increase to the personal allowance and higher rate threshold to £12,500 and £50,000 respectively from April 2019, coming a year earlier than originally forecast. This is a tax saving of £860 for someone earning £50,000 a year. There are no other changes to income tax bands or allowances.
The Chancellor did confirm that the roll out of IR35 in the private sector will now be delayed until April 2020 and limited to only Large and Medium sized companies. This is following consultation after it’s implementation across the public sector. This could potentially effect you if you are self-employed and meet certain criteria. Typically, this where you work alongside employed workers who carry out the same role. IR35 requires that both you and the contracting company pay the same level of Tax and National Insurance as the equivalent employee.
The big ‘rabbit out of the hat’ for personal finances was the increase to the personal allowance and higher rate threshold to £12,500 and £50,000 respectively from April 2019, coming a year earlier than originally forecast. This is a tax saving of £860 for someone earning £50,000 a year. There are no other changes to income tax bands or allowances.
The Chancellor did confirm that the roll out of IR35 in the private sector will now be delayed until April 2020 and limited to only Large and Medium sized companies. This is following consultation after it’s implementation across the public sector. This could potentially effect you if you are self-employed and meet certain criteria. Typically, this where you work alongside employed workers who carry out the same role. IR35 requires that both you and the contracting company pay the same level of Tax and National Insurance as the equivalent employee.
Pensions:
Despite the usual scare-mongering over a ‘tax raid’ on pensions, there were no changes to pensions. The pension LTA (Life Time Allowance) will rise to £1,055,000 from April 2019, as expected. Reassuringly, there are no changes to pension AA (Annual Allowances). The standard AA remains at £40,000, the money purchase AA stays at £4,000 (with no carry forward) and there are no changes to the high income AA taper rules.
Despite the usual scare-mongering over a ‘tax raid’ on pensions, there were no changes to pensions. The pension LTA (Life Time Allowance) will rise to £1,055,000 from April 2019, as expected. Reassuringly, there are no changes to pension AA (Annual Allowances). The standard AA remains at £40,000, the money purchase AA stays at £4,000 (with no carry forward) and there are no changes to the high income AA taper rules.
Capital Gains Tax:
The CGT (Capital Gains Tax) allowance will increase by £300 to £12,000 from April 2019.
The only significant changes to CGT was in the specific treatment of additional properties on disposal. Lettings Relief on CGT for property disposals will now only apply where the owner is in shared occupancy and the Final Period exemption will be reduced from 18 months to 9 months.
The CGT (Capital Gains Tax) allowance will increase by £300 to £12,000 from April 2019.
The only significant changes to CGT was in the specific treatment of additional properties on disposal. Lettings Relief on CGT for property disposals will now only apply where the owner is in shared occupancy and the Final Period exemption will be reduced from 18 months to 9 months.
Inheritance Tax:
As expected, the IHT nil rate band will remain frozen at £325,000 until April 2021.
The residence nil rate band will increase from £125,000 to £150,000 from April 2019, allowing some couples to leave up to £950,000 to future generations free of IHT.
As expected, the IHT nil rate band will remain frozen at £325,000 until April 2021.
The residence nil rate band will increase from £125,000 to £150,000 from April 2019, allowing some couples to leave up to £950,000 to future generations free of IHT.
Trust Taxation:
There will be a consultation to consider the simplification and fairness of trust taxation.
The existing IHT regime for trusts is notoriously complex and any attempt to simplify it is extremely welcome. Removing the complexity of trust tax charges would allow advisers to concentrate on the benefits a trust can offer their clients to control their affairs, without them being fearful of charges they don’t fully understand.
There will be a consultation to consider the simplification and fairness of trust taxation.
The existing IHT regime for trusts is notoriously complex and any attempt to simplify it is extremely welcome. Removing the complexity of trust tax charges would allow advisers to concentrate on the benefits a trust can offer their clients to control their affairs, without them being fearful of charges they don’t fully understand.
ISA's:
Again, rumours were circulating of a change or removal of certain ISA ranges, yet nothing of the kind materialised in this budget. The annual ISA limits stay at £20,000 per person, with no reduction in the range of ISA options available to meet different needs.
Again, rumours were circulating of a change or removal of certain ISA ranges, yet nothing of the kind materialised in this budget. The annual ISA limits stay at £20,000 per person, with no reduction in the range of ISA options available to meet different needs.
As ever, if you have any immediate concerns, do not hesitate to contact your Adviser directly.
Andy McBride DipPFS
Independent Financial Adviser
The details provided in this statement are for information only and do not constitute personal advice.
Independent Financial Adviser
The details provided in this statement are for information only and do not constitute personal advice.
