We take a look at some of the key items in today’s Budget anouncement by Chancellor George Osborne. The Chancellor is now no stranger to Budget announcements. However this makes this latest Budget none the easier to compile and deliver. The current economic environment is a fragile mixture of bright spots, optimism, fine margins for many businesses and tales of woe for others, with many people much less optimistic about tomorrow than they were yesterday…
This summary covers the issues which we feel are most poignant. Look out for our fuller Budget Summary which we will be making available from our website shortly. As with every Budget, as more details and planning opportunities come to light, we will add additional comment on specific planning topics to our website at 3sbg.net . SmartLifestyle™ Financial Planning means SewellBrydenGunn.
For a more in-depth insight into how things may impact on your own financial planning priorities, please do get in touch. Enjoy a financial conversation as part of your regular financial planning review at SewellBrydenGunn.
In Brief: The income tax personal allowance is now set to rise to £10,000 in 2014, a year earlier than previously planned. Other measures brought forward by one year include the introduction of a flat-rate State Pension at £144 per week and the lifetime cap on the cost of social care.
Other items in the Budget are as follows (comments in royal blue):
- The Bank of England retains their CPI inflation target of 2%, with their remit set to change in the future to focus on growth as well as managing price inflation – THAT is a BIG ask! Might we be overstretching ourselves a little??
- As summarised above, the income tax personal allowance is being increased to £10,000 from April 2014, a year earlier than was originally planned. The personal allowance is currently £8,105 (up from £7,475 for Tax year 2011/12) and will rise again to £9,440 on 6th April 2013 (Tax Year 2013/14).
- A 20% income tax relief on the cost of childcare up to £6,000 per child per year will be introduced in 2015.
- Most government departments will experience budget cuts of 1% in each of the next two years, with spending on schools and the NHS ringfenced. The culling of this indirect injection of cash into the economy, partially recouped anyway through income and other transaction based taxes, could be seen as nothing more than political posturing…
- The 1% cap on public sector pay increases is extended to 2015/16, with additional restrictions placed on “progression” pay rises.
- The introduction of a flat-rate state pension at £144 per week was brought forward by one year, to be introduced in April 2016. Broadly welcome news.
- The pension annual allowance is currently £50,000 and will be reduced to £40,000 from 6th April 2014. At least the warning gives everyone affected a chance to plan forward any extra contributions in the short term before the next tax year.
- Stamp duty will no longer be paid when buying shares on the Alternative Investment Market (AIM).
- Capitals gain tax relief for Seed Enterprise Investment Scheme (SEIS) will be extended by two years to 2014/15. For the majority of “middle of the road” investors, items 8 and 9 make little difference…
- The main rate of corporation tax is being cut to 20% in 2015. This was eluded to last year and its inclusion now makes the UK one of the most competitive tax systems for businesses in the developed world. However it is unlikely to bring any major benefit changes for smaller businesses many of whom are currently subject to lower tax.
- A new ‘employment allowance’ is being introduced which will result in businesses paying no employer National Insurance up to the first £2,000 in 2014. This new measure will mean about 450,000 small businesses will not pay employer National Insurance contributions next year. Broadly welcome news.
- Capital gains tax relief on the sale of a controlling interest in a business to an employee ownership structure will be introduced in April 2014, making up to £50,000 worth of shares exempt from CGT on shares received from 1st September 2013. This is certainly a positive step which will help many small business owners wishing to retire or move away from their business.
- A lifetime cap on the amount paid for social care will be brought forward a year to 2016, now to be set at £72,000 rather than the previously suggested £75,000. The asset threshold for means tested benefits will be raised to £118,000. These measures follow at least in spirit the proposals in the Dilnot report previously published and which was of course the subject of much debate fairly recently. Welcome news indeed for many who would otherwise be caught by the “Long Term Care Trap”. This will almost certainly pave the way for the introduction of better more effective Care Funding Products – let us look forward to some proactivity from providers.
- The shared equity scheme is being extended – interest free loans of up to 20% of the value for new-build properties. This is seen by us as good news for the housing market.
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We provide comment on market developments and key financial planning issues, to enable our clients and professional connections alike to understand the implications of whatever is unfolding next. We welcome conversations with individuals, business owners and professional advisers on any of the issues raised in this update.
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