Finishing with a flourish George Osborne hailed his third budget in a year as “for the next generation.”

In advance, this Budget looked as if it would be a difficult one for the Chancellor, faced as he was with disappointing economic numbers and the need to avoid ruffling feathers ahead of June’s in/out referendum. What was to have been the big announcement – reform of pensions – was kicked into the long grass a few weeks ago. Despite the usual not so subtle leaks and the pre-announcements and mass of re-announcements, nevertheless, Mr Osborne did spring a few surprises, including some tax reductions.

In financial planning terms, how will this Budget affect you? If you are – or want to be – a saver, then there is plenty to consider. From April 2017 a new ISA, the Lifetime ISA, will be launched for the under-40s. It looks as if it is a close relation of the recently abandoned pensions ISA and a close friend of the Help-to Buy ISA.
Also from 2017/18, the normal ISA contribution limit – unchanged at £15,240 for 2016/17 – will rise to £20,000.

Forgive my jaded cynicism, but personally, I see this new ISA as a small introduction to more and bigger changes to pension legislation over the coming years. Time will tell…

The most significant financial planning measures included:

• The launch of a new Lifetime ISA from April 2017 for adults under the age of 40, with a maximum contribution of £4,000 a year and a 25% government bonus on savings.

• A cut in the main rates of capital gains tax from 2016/17 to 20% for higher and additional rate taxpayers and 10% for other taxpayers, although the existing rates will continue to apply to gains on residential property and carried interests.

• The previously announced increase in the income tax personal allowance for 2017/18 to £11,500 and the higher rate threshold to £45,000.
• Two new £1,000 tax allowances for property income and trading income, starting in April 2017. These are for money earned from the so-called ‘sharing economy’.

This means people who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income. In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.

• A restructuring of stamp duty land tax (SDLT) on commercial properties.

• A major revamp of business rates, permanently doubling the Small Business Rate Relief.

• The self employed had cause for a small cheer given the abolition of Class 2 National Insurance contributions from 6 April 2018.

If you’d like to read up on what else was announced, outside of financial planning, the official Government pages are here:

www.gov.uk/government/news/budget-2016-some-of-the-things-weve-announced

• Schools & Fizzy Pop! It was announced there would be doubling of funding for sport in primary schools funded by a levy on soft drinks

• And a longer day for many secondary schools - and all schools to become an academy (or on the way) by 2020

• Trains – Crossrail 2 and HS3 get mentions – no mention of the extra exit or finishing the platforms at Putney mainline though!

• Fuel Duty frozen again

• Small businesses in Putney may be cheering - From April 2017, companies that occupy property with a rateable value of £12,000 or less will pay no business rates.

• And other companies will have been pleased that Corporation Tax will be cut again. The main rate of Corporation Tax had already been cut from 28% in 2010 to 20%. It will be down to 17% in 2020.

If you REALLY love facts and figures (or perhaps have trouble falling asleep at night!) the full Budget or ‘Red Book’ published by the Treasury and HMRC can be downloaded as a pdf.

Ian Green

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March 17, 2016