November has become the time to expect the announcement of the Autumn Budget with tax change proposals for the new tax year starting on 6 April.
However, due to the ongoing challenges of tackling the pandemic and providing support to the economy, The Treasury has pushed the Autumn Budget into Spring 2021. We have undergone significant challenges across the world and last year’s Autumn Budget was also cancelled due to the impending election, with Rishi Sunak, the Chancellor, announcing his first Budget in March this year.
The expectation was that the Chancellor would introduce his second Budget this autumn which would restore the cycle of a Spring Statement followed by an Autumn Budget.
What does this mean for financial planning?
Although the absence of a Budget announcement does leave some uncertainty, we do know that there are tax allowances available which can be used before the end of this tax year on 5 April.
Take a look at The Origen Guide to Tax Year Planning which shows some of the financial planning opportunities available.
Financial Planning considerations
Stocks and Shares ISA
Innovative Finance ISA
Counts towards the annual ISA allowance, but new Lifetime ISAs are only available for those aged between 18 and 40. Provides a government bonus towards a first property purchase.
Children under 18 have an ISA allowance which can hold cash or stocks and shares. The child cannot hold both a Junior ISA and a Child Trust Fund (CTF).
Capital Gains Tax
Selling assets can be used to provide additional funds – see Is Capital Gains Tax part of your financial planning?’
Annual allowance for pensions
If you are a higher earner or already taking pension income using drawdown, then your Annual Allowance may be reduced.
The income level where the Annual Allowance starts to reduce has been increased to £200,000, so for some higher earners their Annual Allowance may have increased this year. However, at the top end of the scale, the minimum Annual Allowance has been reduced from £10,000 to £4,000.
The Lifetime Allowance for all pension savings, before incurring tax charges, increased in line with inflation to £1,073,100.
Gifts can also be made from normal expenditure – but to avoid Inheritance Tax challenges on death, careful gifting plans and records are needed.
Looking ahead to the future government plans
The government is focused on supporting the UK economy and people with a range of financial measures, including the furlough scheme which has been extended to March 2021.
The Office of Tax Simplification (OTS) is reviewing Capital Gains Tax (CGT) which was a request from the Chancellor in July and he also provided a Spending Review alongside the Office for Budget Responsibility (OBR) forecast, setting out spending plans for the next year.
The level of government borrowing (£174 billion in the first five months of 2020/21) makes tax rises look very likely. Whilst it is difficult to predict what decisions will be announced in the future, the postponement of the Autumn Budget should not divert attention from financial planning opportunities which are available for saving, making gains and making pension contributions tax efficiently.
To discuss any of these financial planning opportunities, please contact your Origen adviser or call us on 0344 209 3925. All calls are recorded for business purposes and are charged at your phone company’s basic rate.
The value of tax reliefs depends on your individual circumstances. Tax laws can change.
CA6007 Exp: 04/2021