How the Autumn Budget 2018 affects financial planning

In his last Budget before Brexit, Chancellor Philip Hammond announced that the “era of austerity is finally coming to an end” and that this Autumn Budget was for “the strivers, the grafters and the carers.” In this article, Acumen reviews the changes likely to impact financial planning and explains how those could affect you.

Thankfully there were no significant tax or pension changes in the Autumn Budget 2018, so we can continue to help our clients plan for the tax year ahead with confidence.

What the Autumn Budget means for you

There are some significant changes from a financial planning perspective though:

Income tax

• The personal allowance and higher rate threshold will increase earlier than expected to £12,500 and £50,000 respectively from April 2019. The income tax rates and bands for Scottish taxpayers will be announced in Scottish Budget on 12 December.
• There are no other changes to income tax bands or allowances.

Pensions

• The pension lifetime allowance (LTA) will rise to £1,055,000 from April 2019.
• Reassuringly, there are no changes to pension annual allowances (AA). The standard AA remains at £40,000, the money purchase AA stays at £4,000 (with no carry forward) and there are no changes to the high income AA taper rules.

Capital gains tax

• The capital gains tax allowance will increase by £300 to £12,000 from April 2019.

Inheritance tax

• As expected, the IHT nil rate band will remain frozen at £325,000 until April 2021.
• The residence nil rate band will increase from £125,000 to £150,000 from April 2019, allowing some couples to leave up to £950,000 to future generations free of IHT.

Trust taxation

• There will be a consultation to consider the simplification and fairness of trust taxation.
• The existing IHT regime for trusts is notoriously complex and so any attempt to simplify it is extremely welcome. Removing the complexity of trust tax charges would allow us to concentrate on the benefits a trust can offer our clients to control their affairs, without the worry of complicated charges that are difficult to understand so we’ll be watching this space and reporting on this as more detail emerges.

ISAs

• Annual ISA limits stay at £20,000 per person, with no reduction in the range of ISA options available to meet different needs. Junior ISAs and Children’s ISA allowances will increase in line with CPI to £4,368.

It’s usual for more detail to filter out from the Treasury in the days following the Budget but for now we are breathing a bit of a sigh of relief that pensions weren’t targeted and that there might be some reform of trust taxation in the offing.

As always, your dedicated Acumen adviser will be available to talk through any queries you might have following the Chancellor’s Budget statement, so please do give us a call if you have any unanswered questions on 0151 520 4353 or email info@acumenfinancial.co.uk.