Yesterday’s Budget was largely positive for private investors, particularly as a number of detrimental changes were being rumoured. The Chancellor made very few tax or pension changes that will impact on investors and pension savers. For once we can welcome a complete absence of tinkering!
No changes were announced to the Annual Allowance. It was confirmed that the Lifetime Allowance will increase by CPI in April 2018 to £1,030,000.
The ISA allowance will remain at £20,000 per person in the 2018/19 tax year. A combined allowance for married couples of £40,000 is very attractive for a Stocks & Shares ISA.
The Personal Allowance will increase from £11,500 to £11,850 from 6th April 2018.
Higher Rate Tax will become payable on income over £46,350, increasing from £45,000 this tax year.
The Dividend Allowance is currently £5,000. As announced previously, this will be reducing to £2,000 from 6th April 2018, bringing more people into dividend tax. This will mean some people who do not currently need to submit a tax return will need to declare dividend income over £2,000 to HMRC. Our understanding is that you can do this by calling HMRC and requesting an adjustment to your tax code, rather than having to submit a tax return.
Capital Gains Tax
The annual Capital Gains Tax exemption will be increasing from £11,300 to £11,700 from 6th April 2018.
No changes were announced, but it was confirmed that the “residence nil rate band” will increase from £100,000 to £125,000. A married couple who are eligible for this allowance could therefore leave an estate of up to £900,000 to their beneficiaries without any liability to Inheritance Tax.
Enterprise Investment Schemes (EISs)
Currently, the limit for EIS investments is £1 million. This is being increased for “knowledge intensive companies” to £2 million. However, any scheme that is seen to be trying to benefit from the tax break artificially through a “capital preservation scheme” is under the spotlight. We have always avoided the capital preservation schemes for this very reason: a fear that these schemes sail too close to the wind and will ultimately be challenged by HMRC.
Stamp Duty Land Tax (SDLT)
The government will permanently raise the price at which a property becomes liable for SDLT to £300,000 for first-time buyers. The relief will not apply for purchases of properties worth over £500,000. 95% of first-time buyers that pay SDLT will benefit, up to a maximum of £5,000, and 80% of first-time buyers will pay no SDLT at all. However, one could argue that this is a scheme to prop up the housing market, rather than benefit first time buyers.
Overall, a welcome Budget in the sense that there are no significant changes to the taxation of pensions and investments. On a macro level, the growth forecasts are low and low productivity means the full benefits of low unemployment are not being realised.