The Chancellor of the Exchequer, Philip Hammond, gave his first Autumn budget on Wednesday. Georgina Wright, Chartered Financial Planner at Abbotstone Financial Solutions looks at the main points as to what they mean for you and how this has played out against her own predictions.
The Office for Budget Responsibility (OBR) has slashed its forecast for economic growth over the next few years. This may be a result of Brexit. They do expect growth to increase in 2021. Quite a gloomy outlook for the next few years.
They also believe that inflation has peaked at 3%, with the expectation it will fall back to 2% sometime in 2018! Good news for us consumers? Well, given that “shrinkflation” is evident all around us will we really notice a difference if inflation were to fall back – let’s hope so.
I anticipated (as did many) that pensions would be hit in this budget. I was wrong! The only change to pensions was an increase in the Life Time Allowance to £1,030,000 from 6 April 2018.
Furthermore, the chancellor did not make any mention of future reductions to tax relief in EIS. I feel that this will be forthcoming and if you currently take advantage of this you will benefit for at least another year – strike while the iron is hot!
There was (as predicted) an increase to the personal allowance from £11,500 to £11,850 from 6 April 2018. In reality this will cut less than £100 from a basic rate tax payers overall bill. The higher rate threshold also benefited from an increase to £46,350.
The ISA allowance remains at £20,000, although the junior ISA allowance was raised to £4,260 per annum.
Lovemoney.com made a prediction that Stamp Duty could be removed completely for first time buyers – they were right here (to a degree). Stamp duty has been abolished for first time buyers purchasing a property with a value of up to £300,000 – with immediate effect! In London and the South East this will apply to properties with a value of up to £500,000 – with no stamp duty paid on the first £300,000. Great news for first time buyers, but a bit of a kick in the teeth if you have literally just completed the purchase of your first home.
There was absolutely no mention of social care provisions for the elderly.
What do I make of the budget?
The budget lived up to expectations in terms of not rocking the boat. It’s been a difficult year so far for the Conservatives and this budget isn’t looking to cause much in the way of upset to the majority. They most certainly have gone about appeasing the younger generation with the immediate abolition of stamp duty. The higher earners will also be breathing a sigh of relief knowing that pensions tax relief has been untouched.
What is disappointing, and would I would like to have seen, is reference to some tax/care provisions for the older generations. The Care Act 2014 has been deferred until 2020, leaving many vulnerable people using their own assets to fund their own care needs.
Raising the ISA allowance would have been a smart move (in my opinion) especially given the lower dividend allowance coming into force in April.
At least I am able to enjoy a glass of wine knowing that duty here has been frozen so no unpleasant price hikes there – for the moment.
If you have any queries about how the announcements in the budget may impact on you please do not hesitate to contact us.