Duncan Lawrie Online ▼

Posted on: 16 March 2016

A seemingly upbeat Budget was delivered today by the Chancellor, George Osborne, despite what he referred to as a materially weaker outlook for the economy - with GDP growth forecast downwards by the Office for Budget Responsibility (OBR) and “storm clouds gathering” on the horizon. Global markets, he said, are turbulent, but that the UK economy is now prepared to face them, unlike before the 2008 global financial crisis where he described the UK as “powerless”.
 

Stability, long-termism and next generation were the order of the day – “acting now so we don’t pay later”. And no doubt the announcements made around child healthcare, education and personal finance for the under 40s will form the headlines of tomorrow’s papers.
 

We have provided a summary below of the main changes announced today which may be relevant to you. If you have any questions, or would like to speak to one of our Financial Planners, please don’t hesitate to get in touch with us.
    

Main changes

Capital Gains Tax

From 6 April 2016, Capital Gains Tax (CGT) will be reduced to 20% for higher-rate taxpayers and 10% for lower-rate taxpayers (from 28% and 18% respectively). This will benefit those individuals making capital gains on shares, although there will be an 8% surcharge for those making capital gains on second properties.
    

Personal Allowance

From April 2017, the personal allowance will be increased to £11,500, and the higher-rate income tax threshold will be raised to £45,000 (up from £42,385). There will be a new £1,000 exemption from income from various sources, but details are yet to be confirmed.
    

Pensions

The Government will consult over the introduction of a 'Pension’s Advice Allowance' to allow people to withdraw savings to pay for regulated advice. The allowance will allow people over the age of 55 to withdraw up to £500 tax free from defined contribution pensions to redeem against the cost of financial advice. The plan was first recommended by the Financial Advice Market Review (FAMR), which was published on Monday this week.
   

The Treasury has also committed to building a ‘Pensions Dashboard’ by 2019. In his speech, the Chancellor alluded to this and to helping people keep track of multiple pension pots. Budget documents state that the Government will ensure the industry designs, funds and launches a pensions dashboard by 2019. This will mean that  individuals can view all their retirement savings in one place.  
    

ISAs

The Government is to introduce a Lifetime ISA to offer younger generations a simpler option to save for their first property purchase or their retirement.

From April 2017, people under 40 will be able to contribute up to £4,000 a year into the new Lifetime ISA. The Government will top up savings by £1 for every £4 saved, up to the age of 50.

Funds can be used to buy a first home, up to the value of £450,000, any time from a year after opening the account or  can be withdrawn from age 60 to fund retirement.

Savings can be accessed at any time prior to that but the bonus will have to be returned and a 5% charge will be levied.

However, the Government is to consult on replicating the US 401k system where the bonus can be reclaimed if money is put back into the product.

The Government will also consider allowing the product to be used for other “specific life events” aside from property purchase.

The overall ISA allowance will increase to £20,000 per person from April 2017. The £4,000 Lifetime ISA will be included in the overall ISA limit.

    

Business

The Chancellor confirmed that corporation tax will be cut to 17% by 2020 and that the threshold for Business Rate Relief will go up to £15,000 permanently.
    

Self-employed

For the self-employed, Class 2 National Insurance will be abolished from April 2018, although the main National Insurance on self-employment profits (Class 4) will remain and be reformed to enable self-employed individuals to build entitlement to a state pension.
    

How we can help

If you would like to know anything further or to understand how the rule changes impact your personal wealth plans, please don't hesitate to contact your Duncan Lawrie Relationship Manager.
  


Information provided in this article and opinions expressed are for general information and not personal to your circumstances. They are not intended to provide specific financial advice.