Well that was the Budget that was…..or was it?
After the budget last week and the flurry of summaries that crossed our desks we thought we would take some time to assess the fall out and digest what it all means.
Given what has happened since, and with the upcoming EU Referendum looming we would not be surprised to see yet another summer budget, whatever the outcome.
For the time being lets deal with what we know.
There is a cut to corporation tax coming down the line for business owners, which will partly offset the additional dividend tax by 2020, reducing by 1% each year from 2017 down to 17%.
There have been some changes to the rules on Entrepreneurs Relief (ER) allowing for claims on an “associated disposal” of a privately held asset alongside a business disposal to a family member.
This seems like a sensible move to allow proper succession planning within family businesses without being over penal.
There was the confirmation of a lot of what we already know, for example the new rates of dividend tax and dividend allowance, which we have previously covered in The End of the Dividend.
Definitely food for thought for business owners and investors alike.
For the first time the announcement on the rates and bands of income tax did not apply directly to Scotland with the new powers coming in the Scotland Bill.
We now know that the Scottish Government, should it be re-elected, will not be increasing the basic rate band to £45,000.
Capital gains tax on the other hand is going to be cut from 6th April with the 18% rate cut to 10% and the 28% rate cut to 20%.
This will not apply to property transactions.
There seems to be a real move toward encouraging investment in companies over property. Property is also being hit by an extra 3% stamp duty on buy-to-lets and second homes.
Good news for ISA savers with the annual allowance increasing to £20,000 from 2017.
This will give more scope for long term savers looking for a source of tax efficient income in the future.
We have also seen a partial move to a pension ISA through the introduction of the Lifetime ISA for those aged 18-40. This will give savers a 25% bonus should they hold the savings until age 60 or if they use the proceeds to buy a home.
Our view is this is unlikely to survive as the Chancellor would seem to be lumbering future governments with a huge liability. There is every chance that this will be changed by the next government as unworkable.
This would seem to torpedo Auto Enrolment and could be seen by some as an alternative leading to a much higher rate of opt out.
We will have to watch this space.
Strathclyde Sirens and Murphy Wealth team up to look after your financial health
We are working with Strathclyde Sirens, Scotland’s only semi-professional netball team, to create toolkits and share valuable advice in order to help the population look after their financial health during this uncertain time.