Philip Hammond, UK Chancellor of the Exchequer, published the 2018 Budget to Parliament on 29th October. Many people are rightly asking, how will this budget affect me?
On the higher level, the Budget spoke about the economy. Notably, the deficit has reduced from 9.9% in 2009/10 to 1.1% today, and 3m more people are in employment.
There were also increased spending commitments for defence, the NHS and England’s roads. Primary schools will get an average of £10,000 more in funding. Secondary schools, on average, will get an extra £50,000.
Closer to home, there were also announced changes to the Personal Allowance, housing and business allowances and relief.
Read on for a summary of some of the important points likely to affect you. For more information on the 2018 Budget and how it impacts your financial situation, please do not hesitate to contact us.
#1 Income Tax
One significant announcement in the 2018 Budget is that the National Living Wage is set to go up from £7.83 to £8.21 in April 2019.
In addition, the Personal Allowance will rise to £12,500 in April 2019 – a year earlier than expected. For basic rate taxpayers, this is good news. It means £1,205 less tax to pay compared to 2010/11.
Of particular interest to our clients, the threshold for paying the higher rate of tax will rise from £46,350 to £50,000 in April 2019. For those earning over the latter, that means £3,650 will be taxed at 20% instead of 40%. That’s £860 in your pocket (including the Personal Allowance gain).
The two above two rates will rise with inflation after April 2019, meaning you should not lose out in real terms as prices rise.
The Help To Buy scheme will be scrapped by 2023 – two years after its previously scheduled end. From 2021-23, moreover, only first-time buyers will be able to access the scheme.
One interesting change is that first time buyers will be eligible to relief from Stamp Duty. To be eligible, the home must be in shared ownership and the property must be under £500,000.
#3 Pensions & Welfare
There were not many significant changes announced to pensions in the 2018 Budget. Inheritance tax has also been unaffected.
However, one important area of note is the pension Lifetime Allowance. As planned, this will increase to £1.055m in line with CPI for 2019/20.
Another noteworthy announcement concerns Universal Credit, where work allowance will be increased to £1,000 a year.
Many things will go on the same for the UK’s businesses. There were no changes to corporation tax, for instance, and the VAT threshold of £85,000 is set to continue for the next 2 years.
Small companies will be affected by changes to the apprenticeship levy. You will no longer be required to contribute 10%. Rather, you will be required to contribute 5%.
For two years, the annual investment allowance will be increased to £1m (up from £200,000).
For those affected by PFI contracts (private finance initiatives), you will clearly need to know that these are set to be scrapped.
Entrepreneurs will see an increased minimum qualifying period for entrepreneurs relief, up from 12 months to 2 years.
Keep Your Finances on Target
If you have any questions about your finances in light of the Chancellor’s new Budget announcements, please phone or email us for a friendly chat with one of our financial advisers.