Budget 2016: Key Points That Could Affect Your Life Goals
Now that this year’s Budget has been published, it’s well worth looking at what’s been announced and how the changes might affect you and your life goals.
The Chancellor’s overall prediction for the economy is a little more cautious this year, taking into account the uncertainty over the European referendum. All of his forecasts remain predicated on the UK remaining in the European Union and he further justified his caution with a philosophy of “act now, don’t pay later”.
The bigger picture is that the economy is expected to grow by 2.2pc this year and GDP is expected to rise by a little less at just 2pc. However, the Chancellor was keen to point out that in 2010 the government was borrowing £1 for every £4 it spent, whilst next year that’ll be reduced to £1 in every £14, reflecting the swinging spending cuts of past years.
But what does the Budget mean for the rest of us?
Personal taxes
The usual touchstones of any Budget were present: fuel duty will be frozen for the sixth year in a row and the duty on beers and spirits will be frozen as well.
Few would argue that an increase in the tax-free personal allowance to £11,500 next year will be most welcome. This move will take another 1.3 million low-earners out of the tax system altogether, whilst at the upper end, the higher 40pc rate threshold will increase to £45,000 per annum.
Business taxes
For those of us running businesses, corporation tax will be cut to 17pc by 2020 and the small business rate relief threshold will increase from £6,000 to £15,000. Business rates will now be linked to CPI, the official measure for inflation, rather than the generally higher Retail Price Index linked rate.
Capital gains tax will be reduced to 20pc from 28pc for top rate, and 18pc from 10pc for basic rate from next year, however this bonus doesn’t apply to residential property, so those with a buy-to-let won’t benefit.
There will also be a very welcome extension of entrepreneurs’ relief to long-term investors in unlimited companies, providing more avenues to fund business growth.
Sharing economy
One of the more innovative ideas was the introduction of tax breaks for what the chancellor has chosen to call the “sharing economy”.
This is an idea introduced to meet the growth in the number of us making small amounts of money online. What he called “micro-entrepreneurs”. So those of us who earn a little extra by renting out our spare rooms or holiday homes with Airbnb, or those who buy and sell items on eBay, will benefit from a new £1,000 tax-free allowance.
However, if you’re renting out a whole property it’s not necessarily as attractive as it might be, as any gains may be cancelled out by last year’s cut in tax relief from 40pc to 20pc, due to be introduced at the same time.
Savings
And that brings us to savings. Not such a great place to be with interest rates as low as they’ve ever been, and for longer than most of us can remember. Even so, there is good news: the personal ISA limit will now be raised to £20,000 from around £15,000 providing a little more incentive for those putting a bit aside each month.
The flagship announcement for savers was the lifetime ISA, available from 2017 to those under forty. This will essentially be a secondary pension system offering £1 per year from the government for every £4 saved. This benefit will be available to anyone who saves £4,000 per annum up till the age of fifty.
How these changes will affect you depends on your individual circumstances. Our investment philosophy is guided by the evidence available to us, in this case an examination of both the Budget announcements and your personal financial situation. By tailoring our advice to each and every client, we can provide the personalised financial guidance you need, whether you’re looking into an investment opportunity, pension advice, or simply seeking to improve your quality of life.
To find out more about how this year’s budget can benefit you, get in touch with Expert Wealth Management today on 01993 772 467 or contact us online.
