Naz Financial

A Personal Financial Blog from Naz Miller

Budget 2018: What it Means for Savers

Budget 2018, Philip Hammond, Spreadsheet Phil

 

While mainstream media ponder whether austerity really has ended, here’s my take on what Budget 2018 means for savers. In short, ‘Spreadsheet Phil’ was able to spend an increase in tax receipts of £74bn. This mainly went to the NHS and a few other big-spenders, like defence. There were a few tax cuts to sweeten things for individuals, too.

As my colleagues at St James’s Place said in relation to Budget 2018 , ‘it was reassuring there were no major taxation surprises’.

 

budget 2018 | taxes | savings | investments | red boxBudget 2018 Tax Changes

The income tax cuts announced by the Chancellor in Budget 2018 will inject £2.7bn into the economy next year. The 20% tax band, which currently starts on earnings above £11,850, will rise to £12,500 next year. The higher rate 40% tax band will begin at £50,000 from April, a jump from £46,350. This is a manifesto pledge that’s been brought forward by a year.

And don’t forget, these bands apply to pensioners drawing down savings as income in retirement, as well as employment earnings.

The Capital Gains Tax annual exemption will increase to £12,000. Also, there’ll be consultation to better target Private Residence Relief at owner-occupiers from April 2020. That’s so you don’t pay CGT on the sale of your primary home.

They’re publishing a consultation in January 2019 on a Stamp Duty Land Tax surcharge of 1% for non-residents buying residential property. This is clearly targeting the overseas billionaires’ club brigade investing in London. However, it could also hit the smaller buy-to-let landlord, so we’ll need to watch out for that.

 

Retirement planning

An enjoyable retirement should be a reward for the “hard work of the British people”. Despite the predictions of pundits, there were no changes to the rates of tax relief, allowances or cash withdrawals in Budget 2018. The only change to pensions was a slightly above- CPI increase to the Lifetime Allowance to £1,055,000.

My recommendations for retirement planning remain unchanged; maximise tax-relievable contributions while you can and seek professional advice before doing anything.

 

ISAs

There were no changes to ISA limits. The adult ISA annual subscription limit for 2019-20 will remain unchanged at £20,000. In other words, a stealth tax on savers, as the allowance is eroded by inflation.

Junior ISA and Child Trust Fund subscriptions will increase by CPI from 6 April 2019 to £4,368.

 

Tax-advantaged investments

From the perspective of the tax-advantaged products (EIS/VCT/BR), there were no significant changes announced in the 2018 Budget. Hence, the generous tax reliefs remain in place to support investment in small, growth businesses.

However, it was announced in Budget 2018 that a new “knowledge intensive” EIS fund will be available from April 2020. The expected main features are quite complex, so check before delving into this.

 

In Conclusion

Overall, in Budget 2018 there have been no major taxation changes. That said, it’s worth noting that if the economic outlook changes, the Spring Statement may be ‘upgraded to a full fiscal event’. So, Brexit may yet undo a lot of the economic benefits of Budget 2018.

As ever, the levels and bases of taxation and reliefs from taxation can change at any time. Tax relief depends upon individual circumstances. Talk to an expert before making personal financial decisions.

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Naz Miller

I'm Naz and I'm a Financial Adviser. Prior to working in private practice, I spent 34 years working at Lloyds Bank in Cambridge and surrounding areas. My work has always focused on helping clients achieve their long-term financial objectives.

Glossary of Personal Financial Terms

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In short, AAA ratings (‘triple-A‘ ratings) are the highest credit rating available for an investment, such as a bond or company.

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