In a lot of ways, the headlines from a financial planning perspective are what the Chancellor left alone in this week’s Autumn Budget.

Fiducia Wealth Management
Posted in Fiducia News on 02.11.18

Overview

The ‘end of austerity’ was Philip Hammond’s key and constant theme with the Chancellor claiming that the reduction in borrowing and economic data is ahead of where we expected them to be. He made lots of promises without putting in any tax hikes for individuals, which was a fear going into this week’s autumn statement. As with any Budget however, the devil will be in the detail.

The increases to the personal allowance and higher rate tax threshold will be beneficial to many households, as will the freeze in fuel duty. The fact potholes are getting more than our schools may be a bone of contention, but I am sure we can all agree that any investment in our road network will be beneficial.

In a lot of ways however, the headlines from a financial planning perspective are what the Chancellor left alone. There had been much speculation prior to the budget that Philip Hammond was considering a further raid on pensions, in the form of potentially changing or abolishing tax relief, especially at the higher rates. Thankfully for our clients, this did not materialise.

Another area over which there had been significant speculation prior to the Autumn statement was that the Chancellor would look to change the inheritance tax regime, possibly via changes to Business Relief. Thankfully, again, this did not happen, and he chose to leave the current rules unchanged.

Brexit

Brexit remains a ‘watch this space’. From our perspective, our investment proposition ensures that our client’s funds are geographically spread and diversified across asset classes. This should help to protect our clients from some of the impact, whatever the eventual deal. None of us know what Brexit might look like and there remains a lot of speculation. But once we know more, the investment markets will adapt.

In the event of a disorderly exit from the European Union, it is highly likely that a new Budget would have to be put together.

A Summary of the Key Points:

Personal pension savings

The lifetime allowance for pensions will increase from £1,030,000 to £1,055,000 for 2019/20.

Income tax

The Personal Allowance the amount you earn before you have to start paying income tax will increase by a further £650 in April 2019 to £12,500. The amount people will have to earn before they pay tax at 40% will increase from £46,350 to £50,000 in April 2019.

The Scottish Parliament will set their own rates and bands for Scotland in its Budget due on 12 December.

Capital Gains Tax

The personal allowance for capital gains will rise to £12,000 in 2019-20, allowing people to make an extra £300 profit on asset sales before they owe any tax.

Entrepreneurs relief for CGT on the sale of a business is safe. However, the Chancellor has made some changes:

– First, the qualifying holding period is increased from one to two years – this will be for disposals on or after 6 April 2019 providing a window of opportunity for people to take advantage of the current rules.

– Second, the shareholding test is being tightened. At present, this is by reference to voting rights. For disposals on or after Budget day, the test will be extended. Individuals must have been entitled to 5% of the distributable profits and the assets available for distribution in a winding-up as well as 5% of the voting rights.

ISAs

The adult ISA annual subscription limit for 2019-20 will remain unchanged at £20,000.

The junior ISA annual subscription limit for 2019-20 will be uprated in line with CPI to £4,368.

The lifetime ISA annual subscription limit for 2019-20 will remain unchanged at £4,000.

Stamp Duty and Housing

All first-time buyers purchasing shared equity homes of up to £500,000 will be eligible for first-time buyers’ relief.

£500m for the Housing Infrastructure Fund, designed to enable a further 650,000 homes to be built.

Lettings relief limited to properties where the owner is in shared occupancy with the tenant.

New partnerships with housing associations in England to deliver 13,000 homes.

Guarantees of up to £1bn for smaller house-builders.

The economy and public finances

2018 growth forecast downgraded to 1.3% from 1.5% in March, due to impact of bad Spring weather. The forecast for 2019 raised from 1.3% to 1.6% and annual forecasts raised to 1.4%, 1.4%, 1.5% and 1.6% in 2020, 2021, 2022 and 2023 respectively.

3.3 million more people in work since 2010 and 800,000 more jobs forecast by 2022. Wages growth at its highest in nearly a decade.

Public borrowing in 2018 to be £11.6bn lower than forecast in March, representing 1.2% of gross domestic product (GDP), the total value of goods produced, and services provided.

Borrowing as a share of GDP to rise to 1.4% next year. Borrowing to total £31.8bn, £26.7bn. £23.8bn, £20.8bn and £19.8bn in next five years. Debt as share of GDP peaked at 85.2% in 2016-17, falling to 83.7% this year and to 74.1% by 2023-24.

1.2% annual average growth in departmental spending promised.