Budget 2016

All the insurance companies, compliance providers, banks and other associated product floggers did themselves proud this year. Within 24 hours I received 11 Budget Updates. All pretty similar and all stating the facts but leaving me none the wiser in real terms. So with more of an eye on relevance than on exact detail here goes.

What do I need to know now?

Actually not a lot. No immediate changes that cause us problems just the usual tinkering with booze and fags. This year the third addictive evil drug to receive tax charges is sugar. Nobody will notice or change their habits. (Did I just say wine was evil? Sorry)

Income Tax

We can all earn a tax free amount of income; from next year it rises by £400 to £11000. Then income above this level is taxed at 20%. Then income is double taxed above a higher level. This level is where higher rates of tax start and this has been increased by £615 to £43000. At least now they are round numbers, we all have the chance of remembering them.

It Means Those who are currently in drawdown, but trying not to pay any income tax will become £80 a year better off. Amazing!
Whilst those in drawdown trying to avoid higher rates of income tax, and everybody who currently pays some higher rate income tax will have £203 more in their pockets. Wine anyone?
There are promises of more rises to the tax bands into the future. We can get excited about these when they arrive.

Capital Gains Tax

There is some good news here. The threshold hasn’t changed at all. An investor can make £11000 a year before any CGT is charged. A couple has double that. So I only have a handful of clients who were ever charged. However for the handful with the problem their tax bill has just been cut dramatically.
It Means For many individuals a tax bill has halved as the rate of CGT has dropped from 20% to 10%.
I could give you more detail and how the changes affect higher rate tax-payers, but most clients just don’t need to carry this information in their head. If you need to sell anything profitable then call me.

Inheritance Tax

No changes here, but help is still on it’s way. Currently a couple can leave £650,000 before their family pays any 40% Inheritance Tax. This is still set to rise in stages up to 2020 when a couple can leave £1,000,000.
It Means No changes and we are still on track. Upon second death after April 2020 an inheritance tax charge on an estate of £1 million reduces from £140,000 to nil. This is big potatoes. Let’s hope it happens and then isn’t immediately reversed if Jeremy gets in.
Again I am happy to chat to any client individually about avoiding this voluntary, eventual tax bill.

Was there anything else of interest?

Why yes there was. ISAs just took on a whole new look. Or rather they will in a little over a year. For now no changes; we can continue to invest £15240 per person. That limit rises to £20,000 from the start of April 2017. Hurrah!

Hands up who is under 40?

None of us. That’s not strictly true, we do have a handful of lucky clients who aren’t as old as the rest of us. For you guys there is some good news for you and some bad news that affects not just you, but many other of my clients trying to save as much higher rate income tax as they possibly can.

The Lifetime Individual Savings Account
The LISA debuts in a year from now. How are we going to say this? Will it be Lisa as in the girls name or will it be ISA with an L on the front, which sounds like your head itches due to tiny parasites?

Anyway pop 4 Grand in this boyo and the good old Government will add a further Grand to it, making 5 Grand in total. (Terms and Conditions will apply) Let’s not get too excited just yet, we need to read the small print. That’s the good news now here is the bad.

If you want to make a pension contribution and receive 40% Income Tax relief, then you are on borrowed time. The LISA is the Pension ISA George was banned from announcing due to the must win, European Referendum. George went ahead anyway but used the back door. “It truly was a plan so cunning you could pin a tail on it and call it a weasel.”

R.I.P

Higher rate tax relief on pensions 1921-2017
Higher rate income tax relief passed away quietly today at the age of 96. It was loved by those who received it and loathed by all socialists as an unfair helping hand to those wealthy enough to not need the help. It’s demise was long expected but few would have guessed a Conservative Government would have been the murderer.