Update last chance to use 2017-18 allowances
On 13th March Chancellor Philip Hammond announced the Spring Statement in just 26 minutes. Hammond claimed that growth is forecast higher this year at 1.5% (not 1.4% as predicted); and that debt, as a proportion of GDP, would fall from 2018-19. This is the first debt decline in 17 years. The slight upturn in fortune is attributed to an increase in tax collected from self-employed people which was £2.9bn higher than predicted. However, the OCED recently said that the UK economy will grow at a slower rate than any other advanced or emerging economy this year.
Though the Spring statement was not a mini-budget Mr. Hammond did detail consultations on future policies as follows:
- A new Tech tax looking at how technology giants such as Google and Facebook are taxed;
- The future of cash and digital payments – will we still need 1p and 2p coins?
- Evidence on whether the use of non-agricultural red diesel tax relief contributes to poor air quality in urban areas;
- A possible tax on single use plastic;
- A reduction in tax for least polluting vans.
There will be an additional £1.7bn to deliver 26,000 affordable homes in London.
There will be a revaluation of business rates – brought forward to 2021, and thereafter, evaluations every three years.
Broadly speaking the opposition expressed concerns that additional NHS funding is not being considered now; the Autumn budget being too late. The same concerns where expressed about austerity measures in general – where an increase in public spending was called for.
Here is a quick recap on allowances available in the 2017-18 Tax year.
The 2017-18 Tax year closes very soon. It is important that you don’t lose out on any allowances. Here is what you are able to save and invest:
- ISAs are tax-free savings accounts for cash or equity-based investment savings such as Unit Trusts or OEICS. The total ISA allowance for 2017-18 is £20,000. The ISA can be a blend of a Help-to-buy ISA, an innovative finance ISA, cash or stocks and shares ISAs, or the new Lifetime ISA. But the total amount saved must not exceed £20,000 in this tax year.
- More on Lifetime ISAs – launched in 2017 savers can invest up to £4,000 pa in a Lifetime ISA. The state will add a 25% bonus on top, which is paid until you reach 50 years of age. The maximum bonus is £32,000. To qualify savers would have to open an account on their 18th birthday and save £4,000 per annum.
- More on Help-to-Buy ISAs – designed to help first time buyers save for a deposit for a first home, these ISAs can be grouped by individuals to fund a house purchase. Individual savers can deposit £1,200 in the first month and then £200 per month thereafter. The state will top up 25% up to the value of £3,000 when the ISA is used to fund a house deposit. If the total Help-to-Buy ISA value exceeds £12,000 the state will still only top up a maximum of £3,000.
- We shouldn’t forget Junior ISAs which; replaced Child Trust Funds in 2011. Parent or Grandparents can save up to £4,128 per annum on behalf of a child. The savings can be a blend of cash and stocks and shares ISAs, however cash JISAs can be held with one provider only. Children are able to take control of JISAs aged 16 but cannot access the JISA until they are 18 years’ old.
- The Lifetime allowance on pension contributions is still set at £1m; however, from April 2018 it will be increased by £30,000 to £1,030,000. This is the first rise since 2010. The value of savings is tested when pension pots are accessed, on death, or at the age of 75. Tax penalties are incurred if pension savers exceed their lifetime allowance.
With ever-changing predictions for the UK economy, it is clear that individuals would be well-advised to consult a local Independent Financial Advisor.
Please call our team of Chichester-based IFAs on 01243 532 635 to arrange a consultation.
To discuss pensions, retirement and investment plans with us please ask to speak to Richard Smith.
To discuss Life, serious illness, equity release (to provide for retirement income) and income protection insurances please ask to speak to Hamish Gairns.
To discuss mortgages and insurances please ask to speak to James Mayne.
1) U-turn on tax credits
There will be no further cuts to tax credits.
The disregard will be £2,500. This will mean that any reduction in income in a year of less than £2,500 will have no impact on a tax credit award. In addition, no further changes will be made to the universal credit taper, or to the work allowances beyond those that passed through parliament already.
The minimum income floor in universal credit will increase with the national living wage.
Despite the freeze, Mr Osborne said government will still achieve the promised £12bn per year of welfare savings, unveiling a raft of civil service cuts.
2) Further crackdown on tax evasion and changes for VCTs and CGT
New penalties will be introduced for the General Anti-Abuse Rule, action will be taken on disguised remuneration schemes and stamp duty avoidance.
Mr Osborne said he would also stop abuse of the intangible fixed assets regime and capital allowances.
Energy generation will now be excluded from the venture capital schemes, in a move Mr Osborne said was “to ensure that they remain well targeted at higher risk companies”.
Once digital tax accounts are in place in 2016, he said capital gains tax will have to be paid within 30 days of completion of any disposal of residential property.
3) Auto-enrolment changes and increases to state pension
The next two phases of contribution rate increases for auto-enrolment schemes will be aligned with the tax years.
Mr Osborne said he will increase the state pension age with life expectancy in order to maintain a triple lock on the value of the state pension.
Next year the basic state pension will increase by £3.35 to £119.30 a week. The full rate for the new state pension is set at £155.65.
The savings credit will be frozen at its current level where income is unchanged.
4) The Chancellor wants to build as well as balance the books
The housing budget is doubled to more than £2bn a year and 400,000 more affordable new homes are set to be built by the end of the decade.
Mr Osborne said: “That’s the biggest house building programme by any government since the 1970s.”
Almost half of the building will be starter homes, sold at 20 per cent off market value to young first-time buyers. A total of 135,000 will be Help to Buy: Shared Ownership.
Right to Buy will be extended to housing association tenants and from midnight tonight, tenants of five housing associations will be able to start the process of buying their own home.
The planning system is set for reform and public land suitable for 160,000 homes will be released along with unused commercial land re-designated for starter homes.
The government will also launch London Help to Buy, which will see Londoners with a 5 per cent deposit able to get an interest-free loan worth up to 40 per cent of the value of a newly-built home.
5) Bad news for buy-to-let and property investors
To tackle cash purchases that were not hit by the Summer Budget changes to mortgage interest relief, new rates of stamp duty will be introduced at 3 per cent higher on the purchase of additional properties like buy-to-lets and second homes.
This rate will be introduced in April next year and government will consult on the details so that corporate property development isn’t affected.