In their manifesto, the Tories pledged to increase the income tax personal allowance to £12,500 by and the point at which individuals start paying higher rate income tax to £50,000 by 2020/21. The Chancellor today announced that he is bringing this forward by a year to April 2019. When combined, these changes are worth £860 a year for someone earning £50,000 (Or £130 a year for someone earning £25,000). With a little more money left after tax each month, this is great news for savers who may be able to find more to put away for the future.
Pensions and investments
Pension tax relief remains in tact which is good news for pension savers. With the additional funding required to fulfil the Prime Minister’s pledge to increase the NHS budget by £20.5bn a year in real terms by 2023/24, there had been fears that the Chancellor may go after pension tax reliefs which, as he told the IMF conference in Bali earlier this year, he considers to be ‘eye wateringly expensive’, mercifully, this was avoided.
The Lifetime Allowance (the total amount you can build up in pension benefits over your lifetime while still enjoying the full tax benefits) will increase in line with inflation from £1,030,000 to £1,055,000 which is good news for pension savers.
Positive news also in relation to Pension Dashboards – these are innovative tools that will allow people to see their pension pots, including their state pension, in one place. Following the success of an industry led initiative, the Government will consult later this year on the detailed design for pension dashboards and extra funding is provided in 2019/20 to help make this a reality.
To tackle pension scams, the Government also announces that it will be implementing legislation to make pensions cold calling illegal.
Later this year, the Government has also committed to publishing a paper setting out its strategy for increasing pension participation amongst the self-employed, following the success of auto-enrolment for those in employment.
The ISA allowance will remain at its current level of £20,000 for the 2019/20 tax year although the limits for Junior ISAs and Child Trust Fund accounts will increase to £4,368 giving slightly more headroom for those who want to save or invest tax-efficiently for children.
Stamp duty relief extension
Good news also for first time buyers of shared ownership properties who will now be exempt from Stamp Duty on the first £300,000 of an initial share purchased, when buying shared ownership properties valued up to £500,000. This change will be applied retrospectively from the previous budget.
With the prospect of a little more money in your pocket after tax and with the tax advantages of pensions still firmly in tact (for now at least), there’s no better time than the present to think about investing for your future. With Brexit looming, putting money away regularly can help to smooth out the effects of market volatility and tax advantaged products like ISAs can provide an ideal home for such savings.