The new Chancellor, Rishi Sunak, has revealed his first Budget and the headlines talk about measures to off-set the impact of Coronavirus and a large boost to infrastructure spending. At this stage after the budget, we have seen the headlines and the bit the political parties want us to see, but the detail behind it is still unavailable.
For our clients, we are concerned about two aspects;
1) what difference is it likely to make on a day to day basis
2) what differences does it make to the long-term prospects of their pensions and investments?
The main key points that will affect your personal finances
1) National Insurance – the threshold will rise from £8,632, (2019/20), to £9,500, (2020/21), giving a saving of about £100 per annum for the average worker.
2) Pensions & the Tapered Annual Allowance – higher earners, those over £100,000 per annum will not have their annual allowances reduced as the taper start will be moved to £200,000. This is not all good news as the minimum allowance will be reduced to £4,000, so earners over £300,000 per annum will see a difference. The government expects that 98% of medical consultants will no longer be subject to the taper.
3) Capital Gains Allowance – this has increased by £300 to £12,300 for individuals and £6,150 for trusts.
4) Entrepreneurs Tax Relief – the lifetime limit has been reduced from £10M to £1M.
5) Junior ISAs – the annual allowance has been virtually doubled to £9,000 per annum. The usual ISA limit for those over 18 remains £20,000.
6) Property Tax – 2% stamp duty surcharge on overseas homebuyers, potentially on top of the existing 3% surcharge for second homes and buy-to-let properties.
Further updates, which have been communicated in previous budgets but will come into effect from April 2020:
1) Inheritance Tax – a married couple with children can pass on up to £1M, without having to pay IHT, with two nil rate bands, (£325,000), and two residence nil rate bands, (£175,000), from April 2020.
2) Lifetime Allowance – rises to £1,073,100 in April 2020, (based on changes to CPI).
3) Landlord Tax Relief – private individuals will not be able to recover mortgage interest as a business expense; they will only get a tax credit based on 20% of the mortgage interest repayments, from April 2020.
Will you be better off?
The BBC has a budget calculator that you can enter your personal details, and it will tell you how much better off you are likely to be following the budget. I and a colleague completed it – which told us we will be less than £10 a week better off, being mostly changes to the National Insurance threshold. For most of the working population, this is likely to be the beginning and end to the direct financial changes, as most changes will not cross most everyday lives.
Long term Changes
The budget has made a big play for coronavirus and infrastructure, so this has been flagged as the biggest giveaway of cash since Norman Lamont in 1992. The Chancellor seems to be trying to avoid a potential recession triggered by the virus and kick-starting the “levelling-up” of the regions. For clients, potential inflation will usually give you a better return on your equites, uncertainty will normally improve take-up on gilts and a broader long-term stimulation of the UK economy should improve business prospects, so making any prediction is doomed to failure.
At the risk of becoming as ubiquitous as “mind the gap” in tube stations, the only hedge against unpredictability and inflation is a widely diversified portfolio, held for the long term. In the meantime, hold tight for a bumpy ride as fear takes over from studied optimism.
To arrange a meeting to discuss your financial planning
Please contact Jonathon Clarke - Independent Financial Adviser / Director
Email: jlc@martin-redmanpartners.co.uk
Phone: 01223 792 196
About Martin-Redman Partners
We are a team of experienced Independent Financial Advisers (IFAs) who can advise on your personal or business financial arrangements. We have been building trusted relationships with clients for many years by articulating clear and tailored recommendations in areas ranging from investments to retirement planning, to complex estate planning advice.
The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.