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Low-key Budget buoyed by stronger-than-expected growth and tax receipts

Whilst billed as a Budget to bolster the UK’s economic defences ahead of Brexit, it did contain several key announcements:

Tax-free dividend allowance cut from £5,000 to £2,000 from April 2018

The reduction of the tax-free dividend allowance takes account of the increased ISA allowance, as well as further increases to the tax-free personal allowance which is additional to the dividend allowance. Abolishing it altogether, could bring lots of people into self-assessment with tiny shareholdings having to pay a 7.5% tax charge.

Cost of care

The Chancellor announced a £2bn rescue package for the social care sector and a green paper consultation on funding to be published later this year.

Tax increase for self-employed

The Government wishes to address the differential tax treatment between employees and the self-employed for those earning the same amount. It could be argued that it makes sense, given the recently introduced single-tier state pension. A review will also look at the differences in other benefits, such as maternity leave and sick pay. Class 2 National Insurance contributions will be abolished from April 2018 and Class 4 NICs will rise by 1% to 10% from April 2018 and 11% from April 2019. Philip Hammond subsequently reversed the decision a week later. [1]

25% tax charge for transfers from UK pensions to overseas pension schemes (QROPS)

For transfers after the 9 March, a 25% tax charge will be deducted before the transaction completes. Whilst it might look penal, it makes sense to claw back UK tax relief and plays to the government’s message about everyone paying their fair share of tax.

Overseas pensions are there to help those that are genuinely moving overseas and want the option to restructure their savings. It will stop the fraudulent schemes and advisers that are encouraging people with no intention of ever leaving the UK to try to avoid future UK taxes.

For savers, there’s already been plenty of good news announced

But once again, the pension system gets a little less generous

Inheritance Tax (IHT)

Read the full budget speech here [2]