Following the Chancellor Philip Hammond’s first Autumn Budget in November 2017, here are the key announcements which affect financial planning.
How do these changes affect you:
• Inheritance Tax
Inheritance Tax threshold remains at £325,000 but the residence nil rate band increases to £125,000 from April 2018. Inheritance tax receipts are £5.3bn this tax year and expected to hit £6.5bn in 2022, so as property prices continue to rise Inheritance Tax planning remains a key need for our clients.
• Tax thresholds
From April 2018 the personal allowance in England and Wales will increase to £11,850 and the higher rate tax threshold will increase to £46,350. This is a positive change for all taxpayers.
• Pension allowances
The Annual Allowance remains at £40,000 and the high earners taper threshold at £150,000. The Lifetime Allowance increases in April 2018 in line with CPI to £1.03m. Pension planning remains a complex area where we can help to plan for the future.
• First time buyers
First time buyers in England and Wales will not pay stamp duty on property up to £300,000 and no stamp duty is payable for the first £300,000 of properties valued between £300,000-£500,000. This will be a boost to the younger generation and also welcome news for ‘Bank of Mum & Dad’ seeing their financial assistance going towards the property purchase rather than the Exchequer.
• Property supply
The Government are setting aside £2.7bn for infrastructure and £44bn to build 300,000 homes each year by the mid 2020’s. The challenge of having a large enough deposit remains, so saving through tax advantaged Lifetime ISA is likely to increase in popularity.
• Dividend Allowance
As previously advised in March the £5,000 allowance will be reduced to £2,000 in April 2018. This impacts shareholding company directors and those with equity based investments held outside of ISAs. Those affected should review investments generating dividends which are held outside tax efficient wrappers.
• Social care
This assessment limit remains at £23,250 which means that if you have assets over this amount, you will be required to fund the care costs yourself. Long term care planning is a key matter to review.
How do these changes affect businesses:
• Business rate relief
Indexation to CPI rather than RPI will be brought forward to April 2018 – providing further savings for business.
• Increase in National Living Wage
Increase in wages for low earners to £7.83 per hour from April 2018.
An increase in employer minimum contribution limits based on qualifying earnings of 2% for employer contributions and 3% for employee contributions for auto-enrolment workplace pension schemes comes into effect in April 2018.
• Corporate gains
From January 2018, the indexation allowance will be frozen. This means that no tax relief will be allowed for inflation accruing after this date in calculating corporate chargeable gains.
• VAT registration threshold
This limitremains at £85,000 despite pressure to reduce this. This will help small businesses in UK (for example similar threshold is £15,000 in Germany).
Previously the main Budget has been in March, but now there will only be one fiscal event each year, the Autumn Budget. From 2018, there will be a Spring Statement update, with a full Budget announcement in the Autumn.
If you have any questions regarding these changes or the Autumn Budget announcement, please contact your Origen Consultant.
This article is for information only and is not to be taken as Financial Advice.