Yesterday’s budget took place on a Monday for the first time since 1962 and was delivered by ‘Fiscal Phil’ who seemed in a jovial mood. Here is our usual summary of the main changes that relate to individuals. As with every Budget, the devil is often in the detail. As more details come to light we will let you know.
With the UK’s deficit coming down and the government getting better at collecting tax, there was some room for manoeuvre. The reception in this morning’s papers is generally positive.
Saving one of the most significant announcements to the end, it was announced that the personal allowance for income tax will increase from £11,850 to £12,500 in April 2019, a year earlier than originally pledged in the Conservative manifesto.
The higher rate threshold for income tax will also be increasing at the same time, again a year earlier than originally pledged. From next April, this higher rate threshold increases from £46,350 to £50,000. Please remember though that National Insurance (NI) contributions are aligned to the thresholds, so with one hand he gave away whilst taking some back with the other.
These changes will reportedly result in a tax cut for 32 million people and save an average of £130 for basic rate taxpayers, and around £500 for higher rate taxes once increased NI is considered.
The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2019/20.
The Chancellor also announced that all shared equity property purchases of up to £500,000 will be exempt from stamp duty. This measure is being introduced retrospectively, with those buying shared equity property since the Spring Statement in March becoming eligible for a stamp duty refund.
There were no significant changes to pensions which was a pleasant surprise given the speculation about the Annual Allowance, higher rate tax relief and death benefits beforehand.
As anticipated, the Lifetime Allowance for pension savings will increase in April 2019 in line with the CPI measure of price inflation, to £1,055,000.
There was renewed commitment to the pensions dashboard, including state pension data as well as a renewed commitment to enrolling self- employed in workplace pensions and introducing a cold calling ban in respect of pensions.
The adult Individual Savings Account (ISA) annual subscription limit will remain unchanged at £20,000.
For Junior ISAs, the annual subscription limit will rise in line with CPI inflation, to become £4,368 in April 2019.
The annual subscription limit for Child Trust Funds will also increase to £4,368, rising in line with CPI inflation and the government will be publishing a consultation on new draft regulations for maturing Child Trust Fund accounts.
There were several future enhancements to Premium Bonds, designed to encourage a stronger savings habit and boost the opportunity for young people to save.
These future enhancements include the minimum investment for Premium Bonds being reduced from £100 to £25, people other than parents and grandparents being able to purchase Premium Bonds for children under 16, and NS&I launching new app to make saving easier.
The promise of £20.5bn of additional funding for the NHS was confirmed.
Hammond also announced £2bn a year of funding for mental health services and an extra £700m a year for local authorities to pay towards care for the elderly and those with disabilities.
Schools are set to receive a one-off £400m bonus, equivalent to £10,000 for each primary school.
There was an extra £1bn in funding for armed forces, to pay for cyber-capabilities and the UK’s new nuclear submarine programme.
There was also an announcement of £900m in business rates relief for small businesses, aimed at helping independent high street shops in particular.
The Chancellor did not bring forward plans for a new tax on non-recycled plastic packaging, but threatened businesses with a new tax on takeaway coffee cups if they don’t make enough progress with recycling.
£500m was pledged for the Housing Infrastructure Fund, which is designed to enable a further 650,000 homes to be built across the UK.
An extra £500m was set aside to help with government preparations to leave the European Union.
Finally, a new digital services tax will be introduced from April 2020. This will apply to digital companies with global sales exceeding £500m