What a relief (I think?)…
It was a strange feeling I had after listening to the Budget, a combination of disappointment and relief. Disappointed, as having to write Informing You there really wasn’t much to get my teeth into, but also relief as an adviser for the very same reason.
It seems an age since we had a Budget that didn’t make radical alterations to legislation; some of which had only been put in place months previously. Long term planning in that environment had become more difficult than ever but perhaps with “spreadsheet Phil” at the helm we may be entering calmer waters.
We once more saw scare stories by the dozen being touted in the weeks leading up to the Budget. Some of these are hoary old chestnuts such as the removal of tax free cash from pensions, but there were others such as cutting the tax relief on pension contributions or reducing the maximum that could be contributed to a pension that seemed more plausible. But when the time came the only change to pension legislation was the previously announced increase in the Lifetime Allowance to £1,030,000 from next April. Hurrah!
I have previously suggested that guaranteeing there will be no change to the legislation surrounding pensions for a period of time would be more than welcome and if this is the start of a meddle free period I will be very happy. Pleasingly there was also no change to the amount that can be saved into an ISA which remains at £20,000 with Junior ISA and Child Trust Funds limits increasing by CPI to £4,260.
In terms of Income Tax the personal allowance will increase to £11,850 and in England, Wales and Northern Ireland the threshold for higher rate tax will increase to £46,350. It was previously announced that the plan is for these to reach £12,500 and £50,000 respectively by 2020. For those of us fortunate enough to live in Bonnie Scotland we have to wait until December 14th to see if we will also benefit from these changes but given we already pay higher rate tax on a lower level of income than the rest of the country I will not hold my breath.
Much of Mr Hammond’s speech focussed on housing and the surprise announcement that Stamp Duty Land Tax (SDLT) would be scrapped for first time buyers on houses up to the value of £300,000, £500,000 in London (although only the first £300,000 would be SDLT free). This only applies to England and Northern Ireland but it means that Nicola Sturgeon has a difficult decision to make as to whether she brings this in for Scotland as well. No doubt she and our own Finance Minister, Derek Mackay, will have their abacus out and will be counting the “bawbees” in the next three weeks.
So what to do as result of the Budget? Well it will be no surprise that it is really a case of using all available allowances as much as possible. Although not announced there is an increase in the CGT exemption which will mean you will be able to make gains of up to £11,700 tax free. Moving as much as possible into ISAs also makes sense especially as the amount of dividends you can receive before tax is falling from £5,000 to £2,000 from April.
As has been the case for as long as I can remember maximising what you can pay into a pension especially if you are a higher rate tax payer is still worthwhile even though the amount that you can contribute is much less than even a few years ago. Also, with no change mentioned to Inheritance Tax making a gift and living for seven years after doing so is still probably the most effective way to reduce the impact of this tax for those with the ability to do so.
For those of you living in England, Wales and Northern Ireland you can rest easy until next November. For us in Scotland we have a few more weeks before we can be certain that our Christmas will be as merry as the rest of you…..