Category Archives: News

UK Budget 2017 – Summary and Comment

UK Budget 2017 – Summary and Comment

In light of the forthcoming ‘Brexit’ slated for 2019, Chancellor Phillip Hammond was always going to announce a tax raising Budget that would generate some extra cash in the Treasury coffers. As a man of prudence, the Chancellor will be putting the extra cash to reserves in case the economy needs some additional financial stimulus when the UK leave the EU.

The big question was where he would raise the additional funds. The headlines have concentrated on the additional tax (National Insurance Contributions) to be paid by the self-employed. Politically we must question how wise it is to increase the tax take on small businesses which have been key drivers in the relatively impressive growth in the UK economy since the 2008 Banking Crisis.

Central government can encourage or discourage a specific sectors by reducing or increasing tax and therefore it cannot be claimed that raising tax from small business is encouraging future growth.

There were no major announcements in this year’s Budget Speech and therefore we will have to wait for at least another year before a Chancellor rips up a most complicated tax system and introduces a simplified and joined up code that will encourage uniform growth in the economy.

Proposed changes that will have a potential bearing on clients financial planning include:

Personal allowance
The tax free personal allowance is being increased to £11,500 in 2017/18.

The threshold above which higher earners start paying 40% tax is being increased to £45,000 for 2017/18 tax year.

Dividends
At present the first £5,000 of dividend income is charged at the nil rate. From 2018/19 tax year this will be reduced to £2,000. This will affect those in retirement who are supplementing pension income from their investments. The measure will also increase tax paid by owner directors of private limited companies who take their pay in the form of both salary and dividends.

National Insurance
The Self Employed Class 4 NIC will increase from 9% to 10% from 6 April 2018 and to 11% from April 2019.

The combination of the reduction in the Nil Rate Dividend threshold and increased Self Employed NIC is effectively an increase cost on business at a time when employers are having to incur additional costs in terms of their contributions to workplace pensions.

Pensions
Regulations were introduced from 6/4/2015 to restrict Purchase pension contributions to £10,000 pa for individuals who have flexibly accessed pension benefits. Following consultation, the Money Purchase Annual Allowance will be reduced from £10,000 to £4,000 from 6 April 2017.

The Government will publish their report on the review of State Retirement Age by 7/5/2017.

Overseas Pension Schemes
Major changes relating to QROPS will be included in the Finance Bill. Holders of overseas pension schemes need to fully consider the proposals in the Bill.

Anti avoidance schemes
HMRC are strengthening tax avoidance sanctions and deterrents – don’t mess with the man with the big gun.

Trading and property income allowances
The Government will legislate in the Finance Bill 2017 to create two new income tax allowances of £1,000 each for trading and property income. The allowances can be deducted from income instead of actual expenses.

Financial Planning measures introduced in previous budgets
ISA contribution allowance 2017/18 – £20,000

Inheritance Tax (IHT) 2017/18 Nil Rate Band – £325,000 plus £100,000 Residential NRB

Capital Gains Tax (CGT) Annual Exemption 2017/18 – £11,300

CGT rates 2017/18 – 10% & 20% for individuals and 18% & 20% on buy to let property.

Summary
A Budget which on reflection provided a few surprises which have made the headlines, but on the whole was reasonably low key.

However, at a time of increasing taxes, we would remind clients that we can design effective financial strategies using available allowances and exemptions in order to increase the after tax returns on their savings and investments. Please contact us for further advice on financial and tax planning strategies.

https://www.gov.uk/government/speeches/spring-budget-2017-philip-hammonds-speech

Ethos Financial Planners – Autumn Statement review

Ethos Financial Planners – Autumn Statement review

Summary

In the near term, the UK’s economic outlook has become more uncertain. The Brexit decision to leave the EU presents both challenges and opportunities. The Autumn Statement has released a set of policies that have been designed to assist with this transition. It prioritises key investment to improve productivity and ultimately living standards.

Changes previously announced for personal tax changes have been adhered to and will continue to provide benefits into 2017-18.

The two budget announcements each year that we have previously been used to will be quickly phased out and we will have a single budgetary announcement in the Autumn, this will be in place by Autumn 2017.

UK Economy

The Office for Budget Responsibility (OBR) forecasts the following GDP growth over the next five years:

  • 1.4% in 2017 (this is a slowdown)
  • 1.7% in 2018
  • 2.1% in 2019
  • 2.1% in 2020
  • 2.0% in 2021

National Productivity Investment Fund

A new NPIF which will be targeted at 4 areas that are critical for improving productivity: housing, transport, digital communications and research and development (R&D). This fund will add £23 billion in high value investment from 2017-18 to 2021-22

The NPIF will provide for £23 billion of spending between 2017-18 and 2021-22

  • accelerate new housing supply
  • tackle congestion on the roads and ensure the UK’s transport networks are fit for the future
  • support the market to roll out full-fibre connections and future 5G communications
  • enhance the UK’s position as a world leader in science and innovation

Fiscal Policy

In the Autumn Statement the government chooses to borrow only to invest in highly-targeted infrastructure and innovation projects that which will boost productivity.

Income Tax & National Insurance

  • the government recommits to raising the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament
  • the business tax road map, including cutting the rate of corporation tax to 17% by 2020
  • freeze fuel duty from April 2017
  • take action to promote fairness in the tax system and will add sanctions and deterrents to tackle tax avoidance
  • ensure multinational companies pay their fair share
  • Insurance Premium Tax rise from 10% to 12% in June 2017

Pensions & Savings Tax, Capital Gains Tax

There are a number of adjustments across these taxation categories which is summarised below:

  • ISA limit to be increased from £15,240 to £20,000 in April 2017
  • the Money Purchase Annual Allowance will be reduced to £4,000 from April 2017
  • the rate of corporation tax will be cut to 17% by 2020
  • Employee Shareholder Status (ESS) – The tax advantages linked to shares awarded under ESS will be abolished for arrangements entered into on, or after, 1 December 2016

Personal Tax

Previously announced tax changes should see income tax reductions in 2017-2018. To get a personal understanding of how this may affect your plans, please CONTACT US.

Inflation

With the pound being weakened post the Brexit decision, there is an expected roll on effect that will be seen with inflation. The Office for Budget Responsibility predicts that the Consumer Price Index (CPI) will see inflation at:

  • 2.3% in 2017
  • 2.5% in 2018
  • 2.1% in 2019
  • 2.0% in 2020
  • 2.0% in 2021

Public Spending

With deficits still high in Public Spending, the government is looking to control public spending, with new initiatives (with the exception of the NPIF discussed above) now all fully funded.

Our team remain committed to supporting you through these changes, should you have any questions, please CONTACT US

The Autumn Statement can be read in full here:
https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016

Families typically spend £40,000 on caring for elderly relatives

Families typically spend £40,000 on caring for elderly relatives
Photo : Daily Telegraph Photolibrary

In an article by the Daily Telegraph at the end of 2014, they reported that a total of 350,000 older people live in residential care in England

Few things destroy family wealth more than paying heart-stopping care home fees, often totalling over £40,000 per annum in the South East, to ensure mum or dad see out their days in comfort. Read more »

George Osborne backs down on radical pension reform

George Osborne backs down on radical pension reform
Photo : Lauren Hurley/PA

George Osborne has been forced to abandon a package of pension reforms, including reducing tax relief for higher earners, amid growing concern that their introduction could have prompted a backlash from affluent voters.

With less than a fortnight to go before the budget, Treasury insiders took the rare step on Friday of ruling out changes that had been mooted. The proposals had included the more radical option of creating a “pensions Isa” that would have eliminated pension tax relief for all those in work. Read more »