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Budget Speech - Nothing much to shout about

At last a Budget speech with nothing much to shout about!

Every year as budget day approaches rumours abound pre changes that will be announced by the chancellor when he stands at the dispatch box in the House of Commons. This year there was the perennial chit chat about how pensions this and pensions that would be changed. This has been the case for as many years as I can remember and I have tended to adopt a wait and see approach. This was certainly the correct stance this year as Financial Services journalists and so called ‘in the know’ industry spokesmen were left to reflect on their utterances.

So I am pleased to say that after the rather staggering changes that came into being in 2016 pensions legislation seems to have been left largely untouched. It was good to find however that the Pensions Lifetime Allowance will actually start to increase again in April 2018 when an inflation hike will push it up by £30,000 from the current £I million limit. The lack of major changes is, I contend, quite important as it allows for continuity of financial planning and advice.

So with few headlines to contend with I’m left to outline some of the more mundane changes that you may be already aware of but that will have an effect on most people’s finances nonetheless.

• Income tax personal allowance is to increase from £11,500 to £11,850 for 2018/19 o Beware those who are over or close to the £100,000 pa mark as the allowance reduces once you breach the threshold.
• The basic rate tax band will be increased to £34,500 so that the threshold at which the basic rate band applies is £46,350 for those who are entitled to the full personal allowance. o Ask us about how pension contributions can extend the basic rate band further.
• Currently the first £5,000 of dividends received are taxed at 0% (the Dividend Allowance). This is set to fall to £2,000 from April 2018.
• The overall ISA allowance will remain at £20,000 for 2018/19.
• The Capital Gains Tax annual exemption for 2018/19 will be increased from £11,300 to £11,700
• The Inheritance Tax nil rate band remains frozen at £325,000 (static since 2009).
• The Residential Nil Rate Band that was introduced at a level of £100,000 for deaths after 6 April 2017 will increase to £125,000 from April 2018.
• This all means that when planning to minimise IHT liabilities there are now three nil rate bands to take into consideration.
• The original standard nil rate band (around since 1986).
  
• The ability to utilised the unused nil rate band of a deceased spouse
• The Residential Nil Rate Band.
• Full utilisation of all three could bring about a total nil rate position of up to £1 million from 6 April 2020.
• Ask us about how the above bands can be used with other exemptions to help mitigate the potential impact of IHT.