In the final scheduled Budget before Brexit, the Chancellor Philip Hammond declared that Britain’s era of austerity was “finally coming to an end” as he delivered the largest giveaway Budget since 2010.
The Chancelllor said he could start spending a £15bn fiscal ‘buffer’ next year if a smooth Brexit is secured in the coming weeks, while a good deal would also lead to an upgrading of growth forecasts, freeing up more money.
He left pensions alone for now and warned of an emergency budget next spring, in the event of a no-deal.
Personal income tax allowance
The measure that will impact the largest number of Britons is the rise in the personal allowance to £12,500, with the higher-rate tax threshold rising to £50,000 from April 2019 — a year earlier than planned. This will save higher-rate taxpayers up to £860 on earnings between £50,000 and £100,000, falling gradually to £600 for those earning £125,000 or more.
The reform of IR35 rules is aimed at preventing contractors from minimising their income tax and national insurance burden by selling their labour through personal service companies. The government estimates that one in three self-employed workers who operate in this way should be paying more tax. As we predicted, this change is the single biggest revenue-raising measure in yesterday’s budget and is designed to bring the private sector in line with regulations brought in to the public sector last year.
No change to ISA limit
The adult ISA annual subscription limit for 2019-20 will remain unchanged at £20,000. This will be the third year in a row it has remained at this level. The annual subscription limit for Junior ISAs for 2019-20 will be uprated in line with the Consumer Price Index (CPI) to £4,368.
Pension lifetime allowance
The lifetime allowance for pension savings will increase in line with CPI for 2019-20, rising to £1,055,000. Pension savers will be forgiven for breathing a sigh of relief that the chancellor has left pensions well alone for now.
Capital gains tax
The annual capital gains tax allowance increases to £12,000 from the current £11,700.
Entrepreneurs’ tax relief
The Chancellor rejected calls to scrap entrepreneurs’ relief, although he is to extend the qualifying period from 12 months to two years ‘to ensure it goes to the right people’.
Fuel duty frozen for ninth consecutive year
Duty on beer, cider and spirits is also frozen for the next year, saving 2p on a pint of beer, 1p on a pint of cider, and 30p on a bottle of Scotch or gin.
As announced in the 2017 Autumn Budget, the government will publish a consultation on the taxation of trusts, to make the taxation of trusts simpler, fairer and more transparent.
NS&I changes should be positive for savers
At the Spring Statement 2018, NS&I was set a Net Financing target of £6.0 billion for 2018-19, within a range of £3.0 billion to £9.0 billion. The target is being increased by £3.0 billion to £9.0 billion, within a range of £6.0 billion to £12.0 billion. The change to the target reflects higher than expected Net Financing from NS&I being delivered in the first half of 2018-19 as a result of changing conditions in the savings market.
NS&I will now allow people other than grandparents and parents to gift Premium Bonds to a child. Up until now, until the child’s 16th birthday, the parent or guardian nominated on the application looks after the Bonds, regardless of who buys them but only the nominated parent or guardian was able to manage and cash in the Bonds.
It has also been revealed that the Government is lowering the minimum investment to £25, whereas it is currently at £100.
Patient capital initiative
The government is to allow defined contribution (DC) schemes to invest in British businesses, under the patient capital initiative. The Financial Conduct Authority (FCA) will publish two consultations by the end of 2018.
Enterprise Investment Schemes (EIS)
Following a recent consultation, from 6 April 2020, the approved EIS fund structure will be amended to focus on Knowledge Intensive Companies. This is subject to legislation and, depending on the outcome of the Brexit negotiations with the EU, subject to EU State Aid approval.
Plastic packaging with less than 30 per cent recycled content would face a new tax on its manufacture or import, the chancellor said, while a levy on single use plastic cups would be kept under review.
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Dan Atkinson, Head of Technical