Budget 2017

In November 23, 2017
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The Chancellor Philip Hammond has delivered his budget which he says will “help families to cope with the cost of living”.

The budget includes plans on tax, housing and travel, alongside an update on the UK’s economic position.

Here is what it means for you.

 

Stamp Duty Reform

The headline of the Budget has been aimed at first-time buyers with an immediate abolition of stamp duty when buying properties of up to £300,000. For properties costing up to £500,000, no stamp duty will be paid on the first £300,000.

The starting point for paying stamp duty in England was £125,000.

 

Income tax will fall

The Chancellor has increased the amount earned before income tax is paid – called the personal allowance – this will rise from £11,500 to £11,850 in April. This will cut less than £100 a year off a basic rate taxpayer’s annual bill.

It would appear that the Conservatives are on track to keep to their manifesto pledge to increase the personal allowance to £12,500 by 2020-21.

The higher rate is paid by 5.2 million people. The threshold will rise from £45,000 to £46,350. The government has already pledged to increase this to £50,000 by 2020-21.

 

What changes are there for drivers?

In a welcome move for drivers, fuel duty has been frozen again.

However, drivers of new diesel cars will be hit as there will be an increase in the road tax that they pay in the first year of owning a car. This will be levied on one band higher than those with petrol cars, owing to the environmental effect of this type of fuel.

 

What we already knew:

  • The Residential Nil Rate Band that allows for people to pass on their main residence to their descendants with potentially a reduction in Inheritance Tax is

 

  • Many buy-to-let landlords are seeing the amount of tax relief that they can claim on mortgage interest payments cut over the course of four years. The process began in April.

 

  • Director shareholders will see a tax break reduced on the dividends they receive. The tax-free dividend allowance – which came into force in 2016 – will be reduced from £5,000 to £2,000 from April. That will affect those who own a small business and pay themselves in dividends alongside a small salary and people with large portfolios of shares.

 

Summary

Without a majority Government to support him, this was never going to be an exciting or controversial budget from Mr. Hammond, however, it is great to see much needed cash being invested into the NHS and help to first-time buyers will certainly be popular with the younger voters.

The biggest underlining issue however is that of the U.K.’s growth and productivity forecasts and the cost and impact of Brexit.

The UK has slashed its 2017 growth forecast from 2% to 1.5%. Output, would be weaker than previously thought in each of the subsequent four years.

To put this into perspective, while there have been three recessions since the early 1980s there has not been a period since then when growth has been forecast to dip below 2% for more than three years in a row.

The UK was also confirmed as the slowest growing G7 economy this year as gross domestic product figures were confirmed for the third quarter.

These figures support many Fund Manager’s decisions this year to reduce their investments inside the UK and to be looking across the horizon at alternative growth opportunities. Whilst UK stocks and shares still form an integral part of all of the investment portfolios, it’s great to see that all of our Fund Managers have been proactive at the beginning of this year in hunting out growth opportunities offered outside of the UK, in Europe, North America and the Emerging Markets. This continues to highlight the importance of having a well-diversified, actively managed investment strategy, as all our Clients do.

Jasmine has been a qualified Financial Planner since 2008. She has also been a member of the Society of Will Writers since 2012. She is passionate about helping Clients build their wealth and achieve the financial lifestyle they desire. Her areas of expertise are that of Savings, Investments, Pensions and Retirement Planning.

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