A Budget for the Next Generation

Our Managing Director, Paul Northmore gives his view on the budget.

Act now don't pay later: this was the key message on the 'Budget for the Next Generation'.

Perhaps the biggest news was the new Lifetime ISA; but there were no major changes in terms of pensions as had been contemplated.

Here are the headlines...

Savings and Investments - The Lifetime ISA

The ISA allowance will rise to £20,000 for all - but more specifically a Lifetime ISA will be introduced for the under 40s who seemingly do not have as good a deal as the older generation when it comes to pension provision.

Sticking with the mantra of 'a budget for the next generation' the Chancellor introduced a Lifetime ISA with a government bonus. For every £4 saved in an ISA, the government will add £1 - a 25% bonus. The annual bonus can be paid up until the age of 50.

This bridges the gap between those who are employed and self-employed, as the latter do not qualify for a workplace pension.

The new ISA can be used to buy a first home and savers can withdraw funds after a year, If saving for retirement it can be withdrawn after the age of 60.

Unlike restrictions on pensions, savers won't pay tax on withdrawals. The money can be accessed at any time and can be returned to an ISA account after a withdrawal.

Existing schemes such as Help To Buy can be merged with the new ISA, which is good news for those who already have savings in another scheme.

Over the next few weeks we expect to hear more about this and will update you on our social media channels.

Pensions

Despite prior rumors, no further changes have been announced to the annual and lifetime allowances for pensions. This means that the tapered annual allowance for high earners will be introduced from 6 April 2016 and the lifetime allowance will reduce from £1.25m to £1m from the same date.

The government will ensure the pensions industry develops and launches a new digital interface, referred to as the ‘pensions dashboard’, by 2019. This is helpful news for our clients who have pension savings in more than one place.

Personal Taxes

The personal allowance will rise again in April 2017 to £11,500. Next month we see the allowance rise to £11,000. By April 2017 the tax free allowance will have gone up by £1000 from when the conservatives first came into power, which reiterates the target to reach £12,500 by 2020. This will mean tax will be cut further for 31m people.

There will be an increase in the higher rate 40p tax threshold to £45,000 from next April. (£42,385 from this April); and Capital Gains Tax will be cut
from 28% to 20%.

Stamp duty on commercial properties

From midnight on Wednesday 16th March stamp duty in this sector will be at the rate of:
0% to £150k
2% over £150k
5% over £250k

This 3% stamp duty supplement will be used locally in the South West to help low income families into housing.

Good news for businesses

Business rates are being reformed, meaning that 6,000 small businesses will pay no rates and 250,000 will have their rates cut from April 2017

People who sell services online or rent out their homes will be eligible for two new tax free allowances worth £1,000 a year.

Tax avoidance crackdown

Tax avoidance by wealthy and large businesses is being targeted.
The new crackdown will get rid of loopholes for multinationals and will lower tax for smaller businesses.

Stamp duty change and tax avoidance moves will mean smaller businesses appear to benefit.

Osborne also announced he is abolishing the Carbon reduction commitment for retailers.

Other headlines included ...

· the Sugar Levy, which introduces a tax on all sugary drinks, the money from which will be invested in sport in schools.

· Insurance premium tax. Following last year's rise of 6% to 9.5% there will be an increase on the standard rate of insurance premium tax. This will raise £700 million which will be invested in flood defences.

· The fuel duty freeze will continue for the 6th year in a row, which saves the average driver £75 a year.