The Spring Budget – What Does It Mean For Your Financial Plans?

The chancellor of the exchequer, Philip Hammond, delivered his spring budget to parliament on 9 March 2017. This budget was the last one to take place in the spring. The chancellor said last year that he wanted to simplify the whole business of setting taxes and government spending, which has become too complicated. Here are some key points from the Budget that could impact your personal financial plans:

New National Savings And Investments Bond Launched

A new NS&I bond paying 2.2% over a term of three years on deposits of up to £3,000 is now available for 12 months from April 2017.

£5K Tax-free Dividend Allowance Cut

The £5,000 tax-free allowance which commenced in 2016 is being cut to £2,000 from 2018.

Income Tax Allowances Confirmed

The personal tax-free allowance has increased to £11,500, with the higher rate tax band rising from £42,385 to £45,000. The Chancellor said the changes ‘will make 29 million people better off’. The additional rate tax band remains at £150,000. Those in Scotland will have different Income Tax bands for earned income.

New Inheritance Tax Residence Allowance

When you pass on your main family home, you can now receive an additional £100,000 on top of the £325,000 Inheritance Tax allowance via the new main residence nil-rate band allowance.
Each individual can pass on up to £425,000 without paying Inheritance Tax as long as your family home is passed on to either children or grandchildren (and your share is worth at least £100,000 in 2017/18). The higher figure applies where more than one nil-rate band is available.

Lifetime Individual Savings Account (LISA)

This new savings product is available to adults aged 18 to 39. It’s designed to support plans to save for retirement or a first home. If you are a first-time house buyer, you can pay up to £4,000 a year into a Lifetime ISA and receive a 25% government bonus. Contributions can continue up to age 50 and can be used to purchase a first property at any time from 12 months after opening the account, or be withdrawn for retirement from age 60.
£20K ISA ALLOWANCE Individual Savings Accounts (ISAs) continue to provide a tax-efficient saving option for many. How much you can save into an ISA each year has been increased to £20,000 – an extra £4,760 of tax-efficient savings. This increase, from April 2017, complements the new dividend allowance and new tax treatment of savings interest.

Buy-To-Let Tax Changes
If you have a buy-to-let property, the amount of mortgage costs you can offset against rental income to assess your profits is being reduced.
The reductions will be phased and may impact how much tax you may need to pay.

Money Purchase Annual Allowance Cut

If you have accessed a money purchase pension flexibly, how much you can then pay into your money purchase pension under the Money Purchase Annual Allowance (MPAA) and receive tax relief is being reduced from £10,000 to £4,000. This only affects you if you have flexibly accessed your defined contribution pension. The reduction doesn’t apply if you have only taken your tax-free cash sum or are already in capped drawdown and remain within the capped drawdown rules.

It’s Good To Talk
The Chancellor resisted making far-reaching tax changes in this last Spring Budget, but some of the announcements could have had an impact on your personal or business situation. If you would like to discuss your financial plans, or if you have any further questions, please contact us.

Levels, bases off and reliefs from taxation may be subject to change, and their value depends on the individual circumstances of the investor. Your home or mortgage. The value of your investments can go down as well as up, and you may not get back the full amount invested.