Budget 3 - The Next Generation

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Finishing with a flourish George Osborne hailed his third budget in a year as “for the next generation.”

In advance, this Budget looked as if it would be a difficult one for the Chancellor, faced as he was with disappointing economic numbers and the need to avoid ruffling feathers ahead of June’s in/out referendum. What was to have been the big announcement – reform of pensions – was kicked into the long grass a few weeks ago. Despite the usual not so subtle leaks and the pre-announcements and mass of re-announcements, nevertheless, Mr Osborne did spring a few surprises, including some tax reductions.

In financial planning terms, how will this Budget affect you? If you are – or want to be – a saver, then there is plenty to consider. From April 2017 a new ISA, the Lifetime ISA, will be launched for the under-40s. It looks as if it is a close relation of the recently abandoned pensions ISA and a close friend of the Help-to Buy ISA.
Also from 2017/18, the normal ISA contribution limit – unchanged at £15,240 for 2016/17 – will rise to £20,000.

Forgive my jaded cynicism, but personally, I see this new ISA as a small introduction to more and bigger changes to pension legislation over the coming years. Time will tell…

The most significant financial planning measures included:

• The launch of a new Lifetime ISA from April 2017 for adults under the age of 40, with a maximum contribution of £4,000 a year and a 25% government bonus on savings.

• A cut in the main rates of capital gains tax from 2016/17 to 20% for higher and additional rate taxpayers and 10% for other taxpayers, although the existing rates will continue to apply to gains on residential property and carried interests.

• The previously announced increase in the income tax personal allowance for 2017/18 to £11,500 and the higher rate threshold to £45,000.
• Two new £1,000 tax allowances for property income and trading income, starting in April 2017. These are for money earned from the so-called ‘sharing economy’.

This means people who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income. In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.

• A restructuring of stamp duty land tax (SDLT) on commercial properties.

• A major revamp of business rates, permanently doubling the Small Business Rate Relief.

• The self employed had cause for a small cheer given the abolition of Class 2 National Insurance contributions from 6 April 2018.

If you’d like to read up on what else was announced, outside of financial planning, the official Government pages are here:

www.gov.uk/government/news/budget-2016-some-of-the-things-weve-announced

• Schools & Fizzy Pop! It was announced there would be doubling of funding for sport in primary schools funded by a levy on soft drinks

• And a longer day for many secondary schools - and all schools to become an academy (or on the way) by 2020

• Trains – Crossrail 2 and HS3 get mentions – no mention of the extra exit or finishing the platforms at Putney mainline though!

• Fuel Duty frozen again

• Small businesses in Putney may be cheering - From April 2017, companies that occupy property with a rateable value of £12,000 or less will pay no business rates.

• And other companies will have been pleased that Corporation Tax will be cut again. The main rate of Corporation Tax had already been cut from 28% in 2010 to 20%. It will be down to 17% in 2020.

If you REALLY love facts and figures (or perhaps have trouble falling asleep at night!) the full Budget or ‘Red Book’ published by the Treasury and HMRC can be downloaded as a pdf.

Ian Green

The required regulatory stuff: Please don’t take this article as personal or specific financial advice. It is intended to be guidance only. The value of any tax break will depend on your personal circumstances. Tax and the associated laws are subject to almost constant change. This is correct as at the time of writing. E&OE. If you are in any doubt as to whether this information is of benefit to you please seek independent financial advice. Please remember if you invest in stocks and shares the value of your investment can go up as well as down. Other elements such as currency exchange fluctuations could affect the value of your investment. If you have property based investments you may not be able to sell when you wish to realise your funds. Past performance is no guarantee of future returns. If you invest in cash based investments inflation may erode the purchasing power of your savings. Green Financial Advice Limited is Authorised and Regulated by The Financial Services Authority No. 523308

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March 17, 2016