In his latest and last pre-Brexit budget, the Chancellor Philip Hammond has declared an ending of austerity and has appeared to open up the public purse and do his best to spread some fiscal happiness.
The headline view of the budget suggests that most people will be paying a little less tax from April onwards, with some of the higher earners seeing that cancelled out by a rise in national insurance.
On the whole this should mean that you’d find the Chancellor has left an extra £155 a year in your pocket, if you earn between £12,500 and £50,000 – with an extra £566 for those earning between £50,000 and £100,000.
So let’s dive a little deeper into things and see what the budget might mean for you:
From April 2019 the personal income tax allowance will increase to £12,500, with the higher rate threshold climbing to £50,000.
Any changes to income tax rates and tax bands in Scotland will be announced by the Scottish Government in their budget on 12 December.
Once again the Chancellor is raising the pensions lifetime allowance, with an increase to £1,055,000 from April 2019.
There are no changes to the pension annual allowance, with the standard rate remaining at £40,000 and the money purchase annual allowance (MPAA) staying at £4,000, (which applies where a drawdown pension income has been taken). There are also no changes to the high-income annual allowance taper rules.
Annual ISA limits remain at £20,000 per person, with the Junior ISA limit being raised to £4,368.
CAPITAL GAINS TAX
There will be an increase of £300 from £11,700 to £12,000 on the annual exemption for Capital Gains Tax, effective from April 2019.
The nil band rates for inheritance tax will remain at £325,000 until April 2021, with the residence nil rate band increasing from £125,000 to £150,000 from April 2019.
Once again, and following a similar announcement in last year’s budget, a consultation into the tax treatment of trusts was announced.
This consultation will examine ways to make the taxation of trusts simpler, fairer and more transparent. However, no date has been set for its publication.
Google and Amazon
During his budget speech, the Chancellor announced, “Digital platforms pose a real challenge for the sustainability and fairness of our tax system. The rules have not kept pace with changing business models.”
With that Philip Hammond then introduced a Digital Services Tax, which is estimated to raise £1.5bn over four years.
This new Digital Services tax will have an obvious impact on the tech giants, whose revenues are over £500m (such as the FAANG companies).
Following the announcement, shares in Google and Amazon dropped 2.3% and 4.5% in mid-afternoon trading. Although the FTSE 100 was up 1.3% to 7,026 points.
The Chancellor revealed that the Office for Budget Responsibility has increased its projections for GDP growth for 2019 from 1.3% to 1.6% next year.
Despite this, as well as having been up prior to the speech, sterling was down 0.11% at €1.1239 against the euro, while against the US dollar it also dropped 0.19% to $1.2804.
2017 BUDGET SUMMARY
Apart from a few corny jokes, Philip Hammond delivered another steady budget in terms of its implications in the world of financial services, with no radical changes to the landscape. That said, the future really depends on what happens with Brexit and that is looking very precarious. The Chancellor has indicated that he would need to revisit the a budget if the UK crashes out of the EU without a deal. Time will tell how that pans out!
As always, if you have any questions regarding a specific area of the budget, or your own personal circumstances, then please don’t hesitate to get in touch with us. We will be happy to help.