Spring Budget Summary 2024

Summary of the Chancellor’s Spring Budget

6th March 2024

Taxes

  • National insurance contributions cut from 10% to 8% for employees.
  • Self-employed national insurance rates cut from 8% to 6%.
  • Higher rate of property capital gains tax will be reduced from 28% to 24%.
  • Abolishment of the ‘non-dom’ tax status. A simpler residency-based system will be introduced in 2025.
  • Abolishment of the Multiple Dwellings Relief.
  • Abolishment of the Furnished Holiday Lettings Regime.
  • One off air passenger duty for non-economy plane passengers.
  • Windfall tax on UK-produced oil and gas extended to 2029.

Benefits

  • High income child benefit charge to be moved to a household-based system by April 2026, with the threshold raised to £60,000 and the top of the taper raised to £80,000 from 6th April 2024.
  • Household support fund extended for a further six months.
  • Abolishment of the £90 charge for a debt relief order.
  • Increase in repayment periods to 24 months for new budgeting advance loans for people on low incomes.
  • Introduction of a new British ISA allowing an additional £5,000 of investments in UK equity on top of the £20,000 annual ISA allowance.
  • Introduction of a new British savings bond through NS&I offering a guaranteed fixed rate of 3 years.

Duty

  • Duty to be introduced on vaping liquids in October 2026.
  • One off increase in tobacco duty to be made in October 2026.
  • Alcohol duty freeze is extended until February 2025.
  • Fuel duty of a 5p cut remains in place

Business Support

  • Eligible film studios in England will secure 40% relief on their gross business rates until 2034.
  • Tax reliefs made permanent at 45% for touring and orchestral productions and 40% for non-touring productions.

Investment zones

  • Increase £200m of funding to extend the Recovery Loan Scheme as it transitions to the Growth Guarantee Scheme.
  • VAT registration threshold increase to £90,000 from £85,000 on 1st April 2024.
  • £100m of ‘leveling up’ funding to support cultural projects.
  • £5m allocation to renovate hundreds of local village halls across England.
  • £242m of investments in Barking Riverside and Canary Wharf where nearly 8,000 homes will be built.
  • Introduction of a new £20m community-led housing scheme supporting local communities to deliver the developments they want and need.
  • £10m to be invested in Cambridge in the coming year to unlock delivery of crucial local transport and health infrastructure.
  • The Treasury will help fund the renovation of Theatr Clywd in Mold.
  • £160m deal with Hitachi to purchase the Wylfa site in Ynys Mon and the Oldbury site in South Gloucestershire.

Renewable energy

  • Great British Nuclear will begin the next phase of the small modular reactor selection process with companies having until June 2024 to submit their initial responses.
  • Up to £120m will be allocated to the green industry growth accelerator to build supply chains for new technology ranging from offshore wind to carbon capture and storage by January 2025.

A&D industry

  • £270m of investment will be allocated into innovative new automotive and aerospace R&D projects, building the UK capabilities in zero emission vehicle and clean Aviation Technologies.

Creative industries

  • Rate of tax credit increase by 5%.
  • Removal of the 80% cap for visual effects costs in the audio-visual expenditure credit.
  • Eligible film studios in England will benefit from a 40% relief on their gross business rates until 2034.
  • Introduction of a new tax credit for UK independent films with a budget of less than £50m.
  • £26m of funding was allocated to the National Theatre to upgrade its stages.
  • The tax release announced in the autumn statement has been made permanent at 45% for tutorial orchestral productions and 40% for non-touring productions.

Health

  • An additional £2.5bn allowance to tackle issues such as waiting lists and including out of date IT systems.
  • £45m in funding was announced to support research by medical charities into diseases such as cancer, dementia and epilepsy including £3m for Cancer Research UK.
  • £650m for AstraZenica to fund the building of a vaccine manufacturing hub in Speke, Liverpool.

Police and court services

  • £75m to roll out more violence reduction units and hot spot policing in England and Wales.
  • A further £230m will be spent on technology allowing people to report crimes via video call and for drones to be used as first responders.
  • £170m will be allocated to fund non-court resolutions in order to reduce reoffending and digitise the court process.

Care and education provisions

  • £165m was announced over the next four years to increase the capacity of the children homes estate.
  • £105m was also allocated over the next four years to build 15 new special free schools to create additional high-quality places and increase choice for parents.
The content of this summary is intended for general information purposes only which is not intended to address your particular circumstances. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

Autumn Statement 2023

Autumn Statement 2023

On the 22nd November 2023, The Chancellor of the Exchequer, Jeremy Hunt announced the Government’s autumn statement.

Prior to the statement, Mr. Hunt had said that “everything is on the table” when it comes to tax cuts and had pledged to “remove the barriers that stop businesses growing”. Thematically the autumn statement echoed these goals, focussing on the need to help struggling families with the cost of living, as well as boosting economic growth and supporting the workforce.

Mr. Hunt began the statement by saying “After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track. We have supported families with rising bills, cut borrowing and halved inflation. Rather than a recession, the economy has grown. Rather than falling as predicted, real incomes have risen.”

The Chancellor outlined that the measures highlighted in the statement would not just remove barriers to investment, but that they would also reward efforts.

The statement was split into three key sections, in the first section, Mr. Hunt highlighted the updated Office for Budget Responsibility (OBR) forecasts to show the progress being made in alignment with the Prime Minister’s economic priorities. The second section illustrated the growth measures to back British businesses and the final section was a conclusion summarising the methods in which it will work.

Before beginning the first section of the statement, Mr. Hunt shared his horror of the recent Hamas attacks on Israel and upon recalling his visit to the concentration camp Auschwitz, Mr. Hunt announced £7m of funding over three years for bodies such as the Holocaust Educational Trust, to tackle antisemitism in schools and universities.

He further announced a repeat of the £3m uplift for the Community Security Trust to tackle antisemitism and all forms of racism.

  1. Office for Budget Responsibilty Forecast

INFLATION

Mr. Hunt highlighted that inflation has reduced to 4.6% from the 11.1% it was when he and Prime Minister, Rishi Sunak, took office. He shared that the OBR are forecasting that headline inflation will fall to 2.8% by the end of 2024 and will continue to fall to the 2% target in 2025.

The Chancellor added that the Conservative Party will not take risks when it comes to inflation and stated the OBR have said that “the measures I take today make inflation lower next year than it otherwise would have been”.

COST OF LIVING MEASURES

Mr. Hunt announced four further measures to support families amid the cost-of-living crisis.

  1. Universal credit and other benefits will be increased by 6.7% from April 2024 amounting to an average of £470m for 5.5m households.
  2. Increased local housing allowance rate to the 30th percentile of local market rents giving 1.6m households on average £800 per year.
  3. Although hand rolling tobacco will increase by 10%, the alcohol tax on beer, cider, wine and spirits has been frozen until 1st August 2024.
  4. The Pension triple lock will remain and the new full state pension will be increased by 8.5% to £221.20 per week from April 2024 worth up to £900 per year per person.

The Chancellor stated that the Government’s commitment to supporting in the easing of the current cost of living crisis now totals £104m, which includes paying around half of the cost of the average household’s energy bills since October 2023, amounting to an average of £3,700 per year per household.

REDUCING DEBT

In last year’s Autumn Statement, debt was predicted to reach almost 100% of GDP but since then, the economy has outperformed expectations.

Borrowing has been reduced and as a result, headline debt is now predicted to be 94% of GDP, reducing to 92.8% in 2028/29. This also means that the UK will continue to have the second lowest government debt in the G7.

BORROWING

Mr. Hunt stated that the Government’s borrowing will continue to fall further from the 4.5% of GDP in 2023-24, to 3.0%, 2.7%, 2.3%, 1.6% and 1.1% in 2028-29, highlighting that this forecast would meet their second fiscal rule that public sector borrowing must be below 3% of GDP by the final year.

To emphasise this point, The Chancellor quoted the words of the late Lord Lawson, stating that “borrowing is just a deferred tax on future generations”.

DEFENCE COMMITMENTS

Mr. Hunt confirmed they will meet their NATO commitment to spend 2% of GDP on defence, continuing by saying that this is more important than ever if we are to continue to support the Ukraine.

VETERANS

Mr. Hunt confirmed the National Insurance relief eligible to veterans will continue for another year and that £10m will be made available to support the Veterans’ Places, Pathways and People programme, an organistion which supports veterans in accessing mental health support and treatment pathways relevant to their needs.

  1. Economic growth

Mr. Hunt revealed that as a result of their increased funding for vital public services, he expects the UK to grow by 0.6% this year, 0.7% next year, by 1.4% in 2025, 1.9% in 2026, 2% in 2027 and finally 1.7% in 2028. Mr. Hunt added that if we want these figures to increase, we need “higher productivity” and that he believes his 110 measures will do just that, by boosting business investment by £20m a year.

Mr. Hunt said “They [the 110 measures] do not involve borrowing more, or ramping up debt… they unlock investment with supply side reforms that back British business in the following areas”.

SKILLS

England’s 9–10-year-olds are now the 4th best readers globally, but there are still around 9 million adults with low basic literacy and numeracy skills. The Prime Minister set out the new advanced British standard to ensure all school leavers reach a minimum standard in Mathematics and English and further to this, Mr. Hunt announced £50m of funding over the next 2 years for engineering apprenticeships and other key growth sectors.

PLANNING

Explaining how local authority planning project timelines are currently taking too long and that deadlines are not being met, Mr. Hunt announced that the system will be reformed, allowing local authorities to recover the full costs of major business planning applications, with the caveat that they will be required to meet guaranteed faster timelines. If they fail, these will be refunded automatically with the application.

Mr. Hunt further announced the funding of £450m for the Local Authority Housing Fund, to deliver 2400 new homes and he will consult on a new permitted development right to allow any house to be converted into two flats provided the exterior area remains unaffected.

Mr. Hunt continued by saying that it’s also taking too long for clean energy businesses to access the electricity grid and that through consultation with businesses such as the National Grid, Octopus Energy and SSC, the Government published their response to the Winser Review and Connections Action Plan.

The measures will aim to cut grid access delays by 90% and offer up to £10,000 off electricity bills over 10 years for those living closest to new transmission infrastructure. These reforms are estimated to accelerate around £90 billion of additional business investment over the next 10 years.

INCREASED FOREIGN DIRECT INVESTMENTS

Mr. Hunt announced that they will put in place a concierge service for large international investors, modelled on the best such services offered by our competitors and will increase funding for the Office for Investment to deliver it.

PENSION FUNDS

Mr. Hunt says he is considering allowing employees to choose where their pension contributions from employers go, which would stop people having to consolidate their pensions whenever they take up a new job and result in them having one pension pot for life.

By 2030, the majority of workplace Defined Contribution (DC) savers will have their pension pots managed in schemes of over £30bn and by 2040, all local government pension funds will be invested in pools of £200bn or more. Mr. Hunt continued by saying how these reforms could unlock an extra £75bn of financing for high growth companies by 2030 and provide an extra £1000 a year in retirement for the average earner saving from the age of 18.

CAPITAL MARKET REFORM

Mr. Hunt said that he will make sure that UK remains one of the most attractive places to start, grow and list a company. As part of this, a NatWest retail share offer will be explored in the next 12 months, subject to market conditions and achieving value for money.

SUPPORTING INNOVATIVE INDUSTRIES

In the last decade, the UK has grown to become the third largest technology sector in the world. Mr. Hunt continued by saying that when it comes to technology, it is clear that AI is at the heart of future growth and that as a result, he wants researchers to have access to computing power.

As such, the Government will be investing £500m over the next 2 years to fund further innovation centers and make the UK an AI powerhouse.

SCIENCE INDUSTRY

To further support research and development, Mr. Hunt announced that he would be creating a new simplified R&D tax, combined with existing R&D expenditure credit and SME schemes.

Mr. Hunt will also reduce the rate at which companies are taxed within the scheme from 25% to 19% and lower the threshold for the additional support for R&D intensive SME schemes (previously announced in the spring budget).

Additionally, because 2028 marks the centenary of the invention of penicillin, Mr. Hunt is giving £5m to Imperial College and the Imperial College Healthcare NHS Trust, to set up a Fleming Centre, to inspire the next generation of world changing innovations.

ADVANCED MANUFACTURING AND GREEN ENERGY SECTORS

The Chancellor confirmed that £4.5bn will be made available over the next five years to attract investment into green energy sectors, which includes £2bn for zero emission investments in the automotive sector, £520m for life sciences and £960m for new green industries focusing on offshore wind, electricity networks and Hydrogen.

  1. LEVELING UP MEASURES

INVESTMENT ZONES

In the spring budget, Mr. Hunt announced 12 new investment zones. In the autumn statement, he announced that the financial incentives for those zones and the tax relief for freeports will be extended from 5 years to 10 years, along with “a new £150m investment opportunity fund to catalyse investment into the programme”.

He also announced three further investment zones focused on advanced manufacturing in the West Midlands, East Midlands and Greater Manchester which will “help catalyse over £3.4bn of private investment and 65,000 new jobs”.

Mr. Hunt also announced a second “investment zone” in Wales, located in Wrexham and Flintshire.

The Chancellor went on to say that the Government is publishing new devolution deals with four areas of the UK, which includes Hull and East Yorkshire.

Mr. Hunt confirmed that he will proceed with over £50m of funding for high-quality regeneration projects in communities such as Bolsover, Monmouthshire, Warrington and Eden Valley and additionally announced:

  • £80m for the new levelling up partnerships in Scotland.
  • £500,000 to support the Hay Festival in Wales.
  • £3 million pounds of additional funding to support the successful Tackling Paramilitarism programme in Northern Ireland.

SMALL BUSINESSES AND BUSINESS RATES

The Procurement Act means that the 30-day payment terms which are already set for public sector contracts will automatically apply throughout the subcontractor supply chain.

From April 2024 however, Mr. Hunt has also introduced a condition that any company bidding for large government contracts should demonstrate that they pay their own invoices within an average of 55 days, which will reduce progressively to 30 days.

The temporary support measure of a 75% discount on business rates up to £110,000 has been frozen for another year. The measure has saved the average independent shop over £20,000. The 75% business rate discount for retail, hospitality and leisure has also been extended for another year. This will save the average independent pub over £12,800 next year.

SELF-EMPLOYED BUSINESS OWNERS

Mr. Hunt praised the efforts of the self-employed workers who kept the country running during the pandemic and as such announced the following measures:

  • Class 2 National Insurance, which is the compulsory £3.45 a week charge paid by self-employed workers earning more than £12,570 which gives state pension entitlement, will be abolished.
  • Class 4 National Insurance, which is the 9% tax on earnings between £12,570 and £50,270, will be reduced to 8% from April 2024.

BACK BRITISH BUSINESS

Mr. Hunt announced that the full expensing introduced in the spring for three years, will be made permanent “due to inflation falling and borrowing going down”. Mr. Hunt stated that the OBR believes it will increase annual investment by roughly £3bn a year – and total £14bn over the forecast period.

Mr. Hunt said that “taken together, the overall impact of today’s growth measures will be to increase business investment in the UK economy by around £20bn a year within a decade, nearly 1% of GDP at today’s level. This is the biggest ever boost for business investment in modern times”.

INCENTIVES TO WORK

Mr. Hunt announced three further reforms designed to improve incentives to work.

  1. WELFARE

With over 100,000 people signed off from work due to sickness and/or disability, Mr. Hunt stated his belief that there is a waste of potential and as such, announced the Back to Work plan.

This will reform the sick note process, so that treatment, rather than time off, will be the default.

  1. INCREASING THE WORKFORCE

The Chancellor announced reform of the work capability assessment, to reflect greater flexibility of homeworking after the pandemic and that they will spend £1.3bn over the next five years to help nearly 700,000 people with health conditions find jobs. Over 180,000 more people will be helped through the University Support Programme and nearly 500,000 more people will be offered treatment for mental health conditions and employment support over the forecast period.

Furthermore, £1.3bn of funding will be provided to offer extra help to the 300,000 people who have been unemployed for over a year without any sickness or disability. But, if after 18 months of intensive support jobseekers have not found a job, Mr. Hunt announced a programme roll out requiring them to take part in mandatory work placement to increase their skills and improve their employability and if they choose not to engage with the process for six months, their case will be closed and their benefits will stop.

  1. LOW PAY

The minimum wage is being increased to £11.44 per hour, meaning that by next year someone working full time on the national living wage will see their real take home, after tax pay increase by 30% when compared to 2010.

NATIONAL INSURANCE CONTRIBUTIONS

Mr. Hunt said that if we want people to get up early, work nights and go the extra mile, we need to recognise that hard work benefits all and as such, The Chancellor announced a 2% cut to National Insurance contributions to 10%, which will help 27m people, coming into effect on 6th January 2024.

If you need help understanding how this statement affects you, get in touch.

Passing your pension onto loved ones

Three tips for passing your pension on to your loved ones

Do you consider your pension an asset in the same way that you think about assets like property, bank accounts, cars, and investments? Some people see pensions differently to those types of assets, but the truth is that your pension is another valuable asset (sometimes worth even more than the family home).

That’s why planning for what happens to your money when you die should include planning for what happens to your pensions along with any other assets that you have.

Let’s take a look at some things you’ll want to bear in mind about passing your pension on to the people you care about most.

1. Find out what death benefits your pension provides

Pension rules and regulations can be very complex. When considering what you want to happen with your pension when you die, you need to know what type of pension you have, and the pension’s rules for what happens on your death.

Some pensions have automatic rules for what happens on your death. For example, they only give an income to a dependent (such as your spouse) on your death. Other pensions have more flexibility on who you can leave your pension to and how they can access it.

2. Complete a nomination of beneficiary form

For pensions that let you choose who you can leave your money to, you can complete a form called a “nomination of beneficiary”. This lets your pension scheme know who you want to leave your money to. In certain cases the scheme may pay to people not nominated if they feel that this is the best thing to do.

Completing a nomination of beneficiary form is important. If your loved ones aren’t on the form they may not be able to keep the money in a pension, which offers tax advantages. Instead, they may simply get a lump sum paid to their bank account.

So knowing what the scheme can offer can then help guide how you write the nomination of beneficiary form. Or perhaps you may want to look at an alternative pension that can provide the options you want for your loved ones.

3. Know what tax may be due

There can be income tax considerations for your loved ones when they receive your pension. This can depend on what age you are when you die, or when your money is paid out, but there may be other rules that also apply.

And further to this, while pensions are usually free from inheritance tax there can be instances where it would apply.

How we can help

The good news is that with our help, you’ll be able to understand the rules of your particular pension, and look at what actions you can take to reduce any negative impacts for your family.

Your pension is likely to be one of your most valuable assets and can provide much needed income for your loved ones once you’re gone.

Let us help you make the most of this valuable asset.

We can also review how your pension fits in with your overall intergenerational financial plan to help you transfer your wealth to the next generation in the smoothest and most tax efficient way possible.

Please give us a call to learn more.

Spring Budget 2023

Spring Budget Summary 2023

ENERGY PRICES / BILLS

  • The energy price guarantee will remain at £2,500 for a further 3 months.
  • Fuel duty frozen at 5p for the next 12-months.
  • Pre-payment meter charges brought in line with comparable direct debit charges.

LOCAL ORGANISATIONS AND FACILITIES

  • £63m fund to keep leisure centres afloat.
  • £100m awarded to third sector organisations such as charities.
  • Duty on draft products in pubs 11p lower than supermarkets from 1st August 2023.
  • £200m invested in England regeneration projects.
  • £161m invested for regeneration projects in Mayoral Combined Authorities and Greater London areas.
  • £400m for Leveling-Up partnerships in areas including Blackburn, Oldham, and Mansfield.
  • In Scotland, £8.6m of targeted funding for the Edinburgh Festivals and £1.5m funding to repair the Cloddach Bridge
  • Greater responsibility for local leaders to grow their local economy.
  • 12 new investment zones confirmed. If chosen, areas will have access to £80m of support.
  • £1.8bn package of support for small and medium-sized businesses that spend on R&D.

CHILDCARE

  • Wraparound care to be offered in all primary schools from 8am-6pm by September 2026
  • 30 hours of free childcare for children over 9 months with working parents by September 2025.
  • “optional” minimum child to staff ratios changed from 1:4 to 1:5 for 2-year-olds in England.
  • Childcare costs of parents moving into work claiming universal credit paid upfront and increased by nearly 50%.
  • Funding to nurseries up by £204m from September 2023 increasing to £288m.
  • Pilot £600 incentive to new childminders rising to £1200 for agency workers.

TAXES

  • £1m Lifetime Allowance on pensions abolished.
  • Corporation tax – paid on company profits rising from 19% to 25%.
  • A new policy of “full expensing” on business taxation for the next 3 years, with the intention to make it permanent.
  • Tax reliefs extended for theatres, orchestras and museums.
  • Pensions annual allowance upped by 50% from £40,000 to £60,000.

INFRASTRUCTURE

  • £8.5bn across 5-years in the second round of the city sustainable transport settlements.
  • A further £200m awarded to the Potholes fund.
  • £20m for the Welsh government to restore the Holyhead Breakwater.

MENTAL HEALTH SUPPORT

  • £10m fund over 2-years to support the voluntary sector with suicide prevention.
  • £400m to increase availability of mental health support and expand Individual Placement and Support scheme.

EDUCATION / JOB OPPORTUNITIES

  • “Returnerships” apprenticeships targeted at over 50s to refine existing skills.
  • Voluntary employment scheme for disabled people investing up to £4,000 to help get them into work.
  • In Northern Ireland up to £40m to extend further and higher education participation
  • £20bn allocated for development of Carbon Capture Usage and Storage supporting up to 50,000 jobs.
  • White paper to be published on disability benefits reform. Plans will abolish the Work Capability Assessment in Great Britain and separate benefit entitlement from an individual’s ability to work.

OTHER ANNOUNCEMENTS

  • £11bn added to the defense budget over 5-years.
  • £30m to increase support and housing for veterans.
  • In Northern Ireland, £3m to extend the Tackling Paramilitarism Programme
  • Climate Change Agreement scheme extended for 2-years.
  • “Great British Nuclear” to help nuclear provide one quarter of electricity by 2050.
  • UK is launching the first competition for Small Modular Reactors.
  • £900m of funding to implement recommendations in independent review for an Exascale supercomputer.
  • Research and innovation programme of £2.5bn set out in quantum strategy.
  • Prize of £1m a year for 10 years to ground-breaking AI research – the Manchester Prize.

Need to know how this budget impacts your future financial goals, get in touch.

Autumn Statement 2022

Autumn Statement 2022

STABILITY, GROWTH & PUBLIC SERVICES

On the 17th November 2022, Chancellor of the Exchequer Jeremy Hunt announced the Government’s Autumn Statement, outlining the tax rises and spending cuts required to fill what the Government have been referring to as a £54bn “black hole”.

Given the volatility of the recent parliamentary restructuring, against the current economic landscape, this announcement had been highly anticipated.

The Chancellor started his statement by outlining that “teachers, nurses and many others are worried about the future” given the economic climate.

Mr. Hunt outlined that the British way is “to be compassionate, to protect the vulnerable” and he reiterated that “this is a compassionate Government”. With this in mind, The Chancellor announced the Government’s top three priorities, which we have summarised below:

  1. Stability
  2. Economic Growth
  3. Public services

Stability

Mr. Hunt praised Britain’s response to the COVID-19 pandemic stating that “the furlough scheme, vaccine roll out and response of our NHS did our Country proud, but they all have to be paid for”.

The lasting impact of the pandemic has made goods more expensive and has fueled inflation, as well as noting this has been worsened by Russia’s invasion of Ukraine impacting the energy crisis.

The Chancellor went on to explain that credibility cannot be taken for granted and that recent inflation figures demonstrated that we as a nation “must continue a relentless fight to bring it down”.

Mr. Hunt continued by saying the Office for Budget Responsibility (OBR) has forecast the UK’s inflation rate to be 9.1% this year and 7.4% in 2023.

Continuing, Mr. Hunt shared the OBR’s position that The Government’s “actions today will help inflation to fall sharply from the middle of next year”, and that overall, this year the economy is due to grow by 4.2%. However, The OBR’s view is that the UK is now in recession.

TAX

To deliver the consolidation of £54bn, The Chancellor explained the need for tax rises and big spending cuts, illustrating how a balanced approach will result in inflation being “significantly lower”. The Chancellor confirmed that the OBR’s belief that these plans will result in a “shallower” recession, and that unemployment will be around 70,000 jobs fewer than if no action was taken.

TAX RATES

In the interest of fairness, The Chancellor illustrated the need for higher earners to contribute more than lower earners. Mr. Hunt confirmed that the top-rate tax threshold will be lowered to £125,000 from £150,000, this in real terms, would equate to an additional tax income of £1200 per year, from those earning £150,000 or more. Additionally, the current banding for income tax rates will be frozen until April 2028.

DIVIDEND ALLOWANCE

Mr. Hunt added that dividend allowances will also be cut from £2000 to £1000 from April 2023, with a further reduction from April 2024 to £500.

CAPITAL GAINS TAX

The annual exempt amount for personal capital gains tax will be cut from £12,300 to £6000 in 2023 and then to £3000 from April 2024.

ELECTRIC VEHICLES

Given it is predicted that by 2025, half of all vehicles will be electric, electric car owners will no longer be exempt from vehicle exercise duty from 2025.

WINDFALL TAXES

From the 1st January 2023 until March 2028, the energy profits levy will be increased from 25% to 35%, with a temporary 45% levy on electricity generators. The Chancellor forecasted that these increases will raise £14bn next year.

STAMP DUTY

Mr. Hunt confirmed that stamp duty cuts will remain in place but only until 2025. After 2025, it is proposed to revert back to previous levels.

NATIONAL INSURANCE

The Chancellor will freeze the Employers National Insurance Contributions threshold until April 2028. However, the Government will retain the Employment Allowance at its new, higher level of £5,000. Mr. Hunt revealed that this would mean around 40% of all businesses will still pay no NICs at all.

VAT

The Chancellor will maintain the VAT registration threshold until March 2026, highlighting the need for our defense systems, given the current conflict in Ukraine.

Mr. hunt confirmed the UK will continue to maintain the defense budget of at least 2% of GDP, to be consistent with our NATO commitment, but explained that the previous promise of 3% cannot be met in the current climate.

Finally, Mr. Hunt announced around 600,000 more people who claim universal credit will be asked to meet with a work coach to increase hours or earnings.

EDUCATION

Mr. Hunt stated that being “pro-education is being pro-growth and providing a good education is not just an economic mission, but a moral mission”.

Thanking the efforts of previous education secretaries, Mr. Hunt announced that the UK has risen 9 places in the global league tables in the last 7 years in terms of mathematics and reading.

The Government wants each child to leave school with the skills to earn highly and to reduce concerns that school leaders nationally are not receiving the funds to make this happen.

The Chancellor said that he will invest another £2.3bn into the education sector per annum and thanked our nation’s education staff for their brilliant work.

SOCIAL CARE

Reflecting on his time as the Health Secretary, The Chancellor explained that the main service we depend on more than any other is the NHS.

Mr. Hunt illustrated how much the NHS staff are struggling with mounting pressure, and that this is particularly apparent in the acute strains in the social sector.

As such, a further £2.8bn is being funded for social care in order for the NHS to provide more care packages.

It will be expected that councils will be able to deliver around 200,000 extra care packages over the next two years. Mr. Hunt described this as the “biggest increase in funding” the adult social care sector had received in its history.

HEALTHCARE

Mr. Hunt announced that in terms of healthcare, a priority needs to be made of tracking waste, as we want better outcomes for citizens and taxpayers. Mr. Hunt confirmed that his he was not asking front-line workers to work harder, but that challenging questions need to be asked about reforms.

As such, former Health Secretary Patricia Hewitt has been asked to advise the Government on how to make sure new integrated care boards and local NHS bodies are operating efficiently.

Due to the NHS inflation pressures, efficiency alone is not enough. Therefore Mr. Hunt confirmed that the budget for health care will increase by £3.3bn.

Furthermore, to provide support to our adjoining nations:

  • The health and education sectors in Scotland will be receiving an extra £1,2bn;
  • Wales will be receiving £1.2bn;
  • Northern Ireland will receive £650m next year and every year thereafter.

Summarising this section of his statement, Mr. Hunt said that that the total package for health and social care will reach a record £8bn and that:

“…this Government is putting the NHS first”.

Mr. Hunt’s next three priority announcements, this time in terms of economic growth, focused on sustaining our public services and avoiding a “doom loop” of even higher taxes and even lower dynamism.

ECONOMIC GROWTH

He announced that the Government’s three economic growth strategies will focus on the following:

  1. Energy
  2. Infrastructure
  3. Innovation

ENERGY

Stating there is only “one way to stop being at the mercy of gas prices” Mr. Hunt announced that we need energy independence and efficiency so that “Putin, nor anyone else” can use it against us.

Therefore, the Government will proceed with the new Sizewell C nuclear power plant in Suffolk (subject to final approval). This would also have the benefit of creating nearly 10,000 high skilled jobs.

On top of this, by 2030, the Government wants to reduce energy consumption from buildings and industry by 15%, which will equate to around £28bn in savings. On average, this would mean £450 per year off the average households’ bills. Mr. Hunt said that this “must be a shared ambition between the government and families”.

Mr. Hunt promised the continuation of £6.6bn of energy efficiency in this Parliament, a further £6bn from 2025 that would amount to a doubling of the current annual investment.

A formation of a new Energy Efficiency Taskforce to help direct the new funding was also revealed.

INFRASTRUCTURE

Moving on to the second Growth priority of Infrastructure, Mr. Hunt said “Today I can announce that I’m not cutting a penny from our capital budgets in the next two years and maintaining that level in cash terms for the following three years.”

This means that although the Government are not growing the capital budget as planned, it will still increase from £63 billion four years ago to £114 billion next year and £115 billion the year after – and remain at that level.

On top of the nuclear plants at Sizewell C, Mr. Hunt confirmed that the Government will also deliver the core Northern Powerhouse Rail HS2 to Manchester, as well as the new hospital programme and the 5G rollout.

To “unlock growth” across the country, Mr. Hunt said that life needs to be made easier for local leaders and as such announced that there will be a newly elected Mayor in Suffolk with new deals to follow for Cornwall, Norfolk and areas in the Northeast to follow shortly.

Moving on to the second Growth priority of Infrastructure, Mr. Hunt said “Today I can announce that I’m not cutting a penny from our capital budgets in the next two years and maintaining that level in cash terms for the following three years.”

This means that although the Government are not growing the capital budget as planned, it will still increase from £63 billion four years ago to £114 billion next year and £115 billion the year after – and remain at that level.

On top of the nuclear plants at Sizewell C, Mr. Hunt confirmed that the Government will also deliver the core Northern Powerhouse Rail HS2 to Manchester, as well as the new hospital programme and the 5G rollout.

To “unlock growth” across the country, Mr. Hunt said that life needs to be made easier for local leaders and as such announced that there will be a newly elected Mayor in Suffolk with new deals to follow for Cornwall, Norfolk and areas in the Northeast to follow shortly.

Praising devolution and singing the praises of Conservative Mayors Ben Houchen and Andy Street, the Chancellor said the Government needs more “inspirational and local leadership” adding that soon “over half of England will be covered by devolution deals”.

Summarising, Mr. Hunt said “taken together, these measures mean that total investment in our future growth will be worth over £600bn over the next five years, the largest investment in public works for 40 years”.

INNOVATION

Describing his plans to turn the UK into the worlds “next Silicon Valley”, Mr. Hunt explained that “thanks to the Conservative Government”, the UK remain a “science superpower”, thanking George Osborne for laying the “vital foundations” to make this possible.

The Chancellor went on to say that modern economics will be defined by “new developments in artificial intelligence, quantum technologies and robotics” and in order to spur this competition on, he is removing import tariffs on over 100 items used in the UK, from car seats to bicycle frames.

Mr. Hunt then added that changes as a result of “Brexit freedoms” will be reviewed and decided based on EU regulations in five growth industries; digital technology, life sciences, green industries, financial services and advanced manufacturing.

Finally, despite the speculation regarding the alleged cutting of the R&D budgets, Mr. Hunt confirmed that this is not the case and will in fact be increased by £20bn by 2024/25.

INFLATION

Further announcements were made to the cost-of-living crisis and the struggles people of all ages are facing.

Speaking directly to pensioners, Mr. Hunt described the Government as being “on your side”.

Mr. Hunt announced that state pensions will increase in line with inflation which keeps the triple lock in place and equates to an extra £870 per year.

The Chancellor said that “targeted support can be given to our most vulnerable citizens with the cost-of-living crisis” as a result of the Government’s discipline.

As such, from April 2023, the energy price guarantee will continue for a further year at a higher level of £3000 for the average household.

This equates to around an average of £500 for every household in the country.

Furthermore, the most vulnerable of our Citizens will be getting a further cost of living support payment, with £900 going to households on means tested benefits, £300 to pensioner households and £150 for individuals claiming disability benefits.

A further £1bn is being provided to enable a 12-month extension to the Household Support Fund which helps Local Authorities assist those who might otherwise fall through the cracks in the system.

Emphasising the Government’s desire to want to “go further” for the nation, Mr. Hunt announced that the Government will cap the increase in social rents to 7% in 2023/24 saving the average tenant £200.

Finally, Mr. Hunt announced that he would accept the recommendation of the Low Pay Commission to increase the national living wage to £10.42 from April 2023 which represents around £600 to a full-time worker.

Contact us to understand how this statement could effect your future retirement planning.

Mini Budget – what it means to you?

Mini Budget – what it means to you?

On Friday 23rd September, Chancellor Kwasi Kwarteng MP, shared the Conservative Government’s mini-budget plans in the House of Commons, stating: “people need to know help is coming and it is indeed coming.”

In this blog, you will find a summary of the key points raised in the Budget update, including the topics of NI, tax, energy prices and stamp duty. The aim of this document is to give an indication of the changes and how they may affect you.

ENERGY PRICES

The Chancellor outlined the Government’s energy price guarantee which limits the unit price of gas and electric for 2 years, capping the annual average household bills at £2,500. The Government is continuing with the existing plans of a £400 rebate to each household this winter, with millions of the most vulnerable households receiving additional payments, and potential savings of £2,200 this year.

Rising energy costs creates a real risk to energy businesses. To support this market, the Chancellor announced a market financing scheme with the Bank of England to offer emergency liquidity to energy suppliers and cap unit price limits for companies.

The Government’s energy plan will reduce peak inflation by 5%, which will lower the wider cost of living expenses and help businesses and the British people with the cost of energy.

The Chancellor says the cost for six months of the energy plan will be £60bn.

ECONOMIC GROWTH

The Chancellor says Great Britain “needs a new approach for a new era” to reach 2.5% growth.

Outlining the Government’s new mini-budget growth plan, he set out a new approach for growth centered around 3 central policies:

  1. Supply side reform
  2. Maintaining a sensible approach to public finances
  3. Cutting taxes to encourage growth

The Chancellor endorsed the Government’s use of borrowing powers to fund temporary measures to support families and businesses, adding that “the heavy price of inaction would have been far greater than the cost of these schemes”

The Chancellor continued to state that there are too many barriers for enterprise, and that we need to approach this by reforming the economy.

To drive growth, The Chancellor explained we need new sources of capital investment and as such, pledged to accelerate reforms for the pension charge cap which will unlock pension fund investments into UK assets and high growth businesses.

This will benefit savers and provide up to £500m in innovative funds and attract billions of additional pounds into the UK science and technology scaleups.

NEW BILL OF PLANNING RESTRICTIONS

Mr. Kwarteng described the current planning system as “too slow and fragmented” and explained the need to end this. The new bill will “streamline consultations and endless duplications” and he pledges to “get Britain building.”

Additionally, he will prioritise infrastructure projects for transport, telecoms, and energy.

UNEMPLOYMENT

Unemployment is at the lowest level for nearly fifty years with more job vacancies than unemployment.

The Chancellor confirmed several policies as part of his mini budget, with a view to reducing benefits if people do not fulfill their potential working hours. This includes up to 120,000 people who are currently claiming universal credit and that will need to take extra steps to earn more money or face having their benefits reduced.

Extra support will be provided to those who are over fifty and who are out of work.

STRIKE ACTION

Mr Kwarteng described the current strike actions as unacceptable as it impacts so many lives. He explained that we need the same minimum standards as other countries to stop “militant trade unions” closing transport during strikes.

As such, the Chancellor introduced new legislation requiring trade unions to put a pay offer to a member vote to ensure strikes can be called only once negotiations have truly broken down.

CAP ON BANKERS BONUSES

The bankers’ cap was introduced by the European Union in the wake of the global financial crisis, meaning that bankers’ bonuses could not be higher than twice their annual salary.

Mr. Kwarteng stated that all the bonus cap did was push up basic salaries of bankers or drive them directly outside of Europe, so it was never truly capped.

Therefore, the cap is being scrapped which will encourage banks to work and pay taxes in the UK.

INVESTMENT ZONES

The Chancellor explained the importance of establishing investment zones across the UK and is committed to working with local partners to also ensure Scotland, Wales and Northern Ireland will benefit if they are willing to do so.

NATIONAL INSURANCE

Personal taxation is an important principal, that people should keep more of the money that they earn. This is a good policy to boost incentives for work and enterprise.

The planned increase in employer national insurance contributions and dividends tax will be cancelled and the interim increase of the national insurance rate brought in for this tax year will also be cancelled.

This cut will take place from the earliest possible moment of 6th November 2022 reversing the levy of a tax cut for twenty-eight million people worth on average £330 every year.

A tax cut for nearly one million businesses and the additional funding for the NHS and social care services will be maintained at the same level.

TAX

Mr. Kwarteng went on to say that “tax determines the incentives across our whole economy, we believe high taxes reduces the incentive to work, they deter investments, and they hinder enterprise.”

As such, he announced several Government taxes cuts:

  • Cutting taxes for businesses in designated sites for 10 years
  • Accelerated tax reliefs for structures and buildings
  • 100% tax relief on qualifying investments in plants and machinery resulting in the annual investment allowance to remain at £1m rather than the predicted decrease to £200k.
  • The scrapping of stamp duty on newly occupied business premises.
  • If a business hires a new employee, for the first £50k they earn, the employer will pay no national insurance whatsoever.

Mr. Kwarteng explained that the interests of businesses is not separate to the interests of the people, as it is the businesses who employ the most people in the country.

It is businesses that invest in the products and services the country relies on, so every additional tax on a business is ultimately passed onto families through higher prices, lower pay, and lower returns on savings.

The Chancellor announced that the planned increase to corporation tax will be cancelled and will remain at 19% instead of increasing to 25%. This will result in Great Britain having the lowest corporation tax in the G20 and will plow almost £19bn back into the economy which is for business to “reinvest, raise wages or pay dividends that supports our pensions”.

Additionally, it was announced the bank surcharge will remain at 8%. Mr. Kwarteng said, “our duty is to make the United Kingdom one of the most competitive economies in the world and we are delivering, we will deliver on this.”

CHANGES TO THE TAX SYSTEM

For the tax system to favour growth, it needs to be much simpler, and the Chancellor announced his plan to embed tax simplification into the heart of the Government, rather than having it separate to the Treasury and HMRC. This will be achieved by mandating all of his tax officials to focus on simplifying taxes to achieve a simpler system.

The plan to do this is by automatically sunsetting EU regulations by December 2023, requiring departments to review, replace, or repeal retained EU laws. The Chancellor said that this “will improve growth and restore the primacy of UK legislation.”

The UK welcomes millions of tourists each year and in order for our high streets, airports, and shopping centres to feel the economic benefit, an introduction of VAT free shopping for overseas visitors was announced.

The Government’s drive to modernise also extends to alcohol duties with an introduction of an 18-month measure for wine duty and a draught relief on smaller kegs to support smaller breweries. The planned alcohol tax increase has been cancelled.

INCOME TAX

Mr. Kwarteng said high tax rates damage Britain’s competitiveness, they reduce the incentive to work, invest and start a business.

He continued, “The higher the tax, the more ways people seek to avoid them, work elsewhere or simply work less.”

The Chancellor announced the 45% top rate of income tax will be abolished and replaced with a top rate of 40% which will simplify the tax system and make Britain more competitive. This will reward enterprise and incentivise growth.

Furthermore, it was announced the cut in the basic rate of income tax from 20% to 19% in April 2023 resulting in a tax cut for over thirty-one million people.

STAMP DUTY

Home ownership is the most common route for people to own an asset, giving them a stake in the success of the economy and society. It was announced that to support growth and to support families aspiring to own their own home, stamp duty will be cut effective from today and is permanent:

  • Buyers will now not pay stamp duty on the first £250k of the property value, doubling from £125k.
  • First time buyers will pay no stamp duty on the first £425k increasing from £300k.
  • The value of property first time buyers can claim relief on is increasing to £625k from £500k.

These measures mean around two hundred thousand more people will be taken out of paying stamp duty altogether.

If you have read this and want us to help you plan successfully for your future, then contact us.

Spring Statement – March 2022

THE BELOW SUMMARY WAS TAKEN FROM THE CHANCELLOR OF THE EXCHEQUER’S SUMMARY ON 23 MARCH 2022.

INTRODUCTION

Against a backdrop of the extraordinary pressure of global conflict, supply chain issues and a subsequent cost of living crisis. Chancellor Of the Exchequer Rishi Sunak delivered a highly anticipated Spring Statement during a period where inflation sits at treble the target inflation rate.

Mr. Sunak introduced the statement by discussing the moral responsibility to support Ukraine by supplying military aid, supporting refugees, and setting unprecedented sanctions through coordination with the country’s allies.

Although the reality of Russia’s aggression will cause severe economic cost for the global economy, the Chancellor spoke fairly optimistically about the country’s economic future.

Mr. Sunak forecasted up to 2027 and discussed a 3-part tax plan in to illustrate his (and the OBR’s) belief In our country’s future economic safety.

The aim for the tax plan announced is to reduce the cost of living, create conditions for higher growth and ensure the proceeds of the growth are shared fairly. To ensure people are left with more of their own money.

FORECAST

OFFICE FOR BUDGET RESPONSIBILITY (OBR) FORECAST

Despite the uncertain and in many cases unprecedented times we are facing globally, Mr. Sunak ensured the nation that through fiscal resilience, the country is meeting all of our fiscal rules.

Underlying debt is expected to fall steadily from 83.5% of GDP in 2022-23, to 79.8% in 2026-2027.

Borrowing as a percentage of GDP is 5.4% this year, and is projected to decrease over the subsequent years as follows:

Year Borrowing %
2022 5.4%
2023 3.0%
2024 1.9%
2025 1.3%
2026 1.2%
2027 1.1%

The OBR has said “There is unusually high uncertainty around the outlook”. With high global inflation and supply chain pressures as defining factors in the forecast, the OBR forecasts growth this year of 3.8%, with the subsequent projections listed below:

Year Growth
2022 3.8%
2023 1.8%
2204 2.1%
2025 1.8%
2026 1.7%

The OBR did state that “our fiscal headroom could be wiped out by relatively small changes to the economic outlook”.

In Mr Sunak’s announcement he did go on to say that we must be cautious, as the OBR have not accounted for the full impact of Russia’s war with Ukraine.

TAX PLAN PART 1 – HOUSEHOLDS

COST OF LIVING

Covid-19, severe global volatility and other factors have meant that costs for goods and services were already high. Disruption to global supply chains combined with the economic response to Putin’s aggression are evident in the OBR’s projected inflation rate of 7.4% this year.

Mr Sunak announced a £9bn plan to reassure those suffering the effects of the energy price cap rise.

MOTORISTS

Fuel duty will be cut for the first time in 20 years by 5p per litre. The cut will come into force at 18:00pm (on the night of the announcement) tonight and last until March next year. A tax cut worth more than £5bn

HOMEOWNERS

Mr. Sunak announced that for the next five years, homeowners will pay 0% VAT on energy saving materials, such as solar panels or heat pumps. In an aim to simply the currently difficult and complicated eligibility process.

The average family having a solar panel set installed, will see tax savings worth £1000 and an annual energy bill saving of £300.

Due to the Northern Ireland Protocol, this will not immediately apply to Northern Ireland, but that they will receive the value of the relief when it can be rolled out UK wide.

Further measures will be announced in the weeks to come.

HOUSEHOLD SUPPORT FUND

The Household Support Fund is being doubled to £1bn with 500mn of new funding being distributed to authorities from April.

NHS FUNDING

A dedicated funding source for the NHS. Providing funding over the long term as demand grows, Mr. Sunak acknowledges that the funding is needed now.

INCREASING THE NATIONAL INSURANCE CONTRIBUTION THRESHOLD

From this July people will be able to earn £12,570 without paying income tax or NIC. This is the largest single personal tax cut in a decade and equalises the Income tax and NIC threshold. Around 70% of all workers will have their taxes cut by more than the amount they will pay for the new levy.

TAX PLAN PART 2 – PRIVATE SECTOR

TRAINING & INOVATION (PEOPLE)

The Chancellor focussed on the need for a new culture of enterprise through training and innovation. Highlighting that the UK is lagging behind our international peers in adult technical skills, with only 18% of 25 to 64-year-olds holding vocational qualifications, 1/3rd lower than the OECD average.

UK employers currently spend half the European average training their employees, so there will be consideration as to whether the tax system is doing enough to allow investment in the right kinds of training.

To expand on this, innovation drove around half of the UK’s productivity growth over the last 50 years, but our lower rate of innovation explains our productivity gap compared with the United States. The amount our businesses spend on research & development as a % of GDP is less than half the OECD average despite us spending more on tax reliefs than most countries.

RESEARCH & DEVELOPMENT (IDEAS)

R&D tax credits will be reformed so they are better value for money, expanding the generosity of the reliefs to include data, cloud computing and pure maths. In Autumn, consideration will also be made as to whether to make the R&D Expenditure Credit more generous.

PRIVATE SECTOR INVESTMENT (CAPITAL)

Weak private sector investment is a longstanding cause of the productivity gap. Capital investment by UK businesses is considerably lower than the OECD average of 14% and it accounts for fully half of our productivity gap with France and Germany.

BUSINESS TAX RATES

Once the Super-Deduction ends next year, the country’s overall tax treatment for capital investment will be far less generous than other advanced economies. As a result of this, In the autumn budget the tax rates on business investment will be cut. With Mr Sunak seeking out ideas with UK businesses.

Business Rates discount will take effect in April for retail hospitality and leisure businesses. This will result in a 50% discount on business rates bill up to £110,000.

A typical pub will save £5,000 a tax cut worth £1.7bn in total.

HELP TO GROW MANAGEMENT SCHEME

Offers businesses mini-MBAs, 90% funded by the government.

HELP TO GROW DIGITAL

Gives businesses a 50% discount on buying new software up to £5,000

ANNUAL INVESTMENT ALLOWANCE

Has been increased to £1mn pounds so that small and mediums size businesses will feel the benefit of full expensing.

EMPLOYMENT ALLOWANCE

The Employment Allowance cuts small businesses tax bills, making it cheaper to employ workers.

For the second time in two years, the Chancellor increased the allowance so that from April, the employment allowance will be £5,000. This is a new tax cut worth up to £1000 for almost 500,000 small businesses.

Mr Sunak’s plan will help people and business deal with rising costs and will help raise the future growth rate.

TAX PLAN PART 3 – ECONOMIC SECURITY

The 3rd objective of The Chancellor’s Spring Statement tax plan is providing the foundations of reassurance that working hard will result in people being able to keep more of what they earn, which in turn will result in a greater economic security.

INCOME TAX

 A goal for conservative governments has been to cut income tax. Covid and the war has added to the already difficult task of cutting income tax. By 2024 the OBR currently expects inflation to be back under control, debt falling sustainably and for the economy to be growing.

With this, the final announcement in Rishi Sunak’s Statement was that before the end of this parliament, for the first time in 16 years, The Basic rate of income tax will be cut from 20p to 19p in the pound. This is roughly a £5bn tax cut for almost 30 million people.

Contact us to find out how the spring budget will effect you.

The content of this ‘Spring Statement 2022’ summary is intended for general information purposes only . The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice. While we believe this interpretation to be correct, it cannot be guaranteed and TKV Financial Management Limited cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into are altering any new arrangement. TKV Financial Management Limited is an appointed representative of Sense Network Limited is authorised and regulated by the Financial Conduct Authority.

Cash ISA’s vs Inflation

Cash ISA vs Inflation

Did you know the Halifax currently pay 0.01%* on their online easy access cash ISA account.

Yes, you have read that correctly 0.01%.

This means for a £20,000 investment which is the annual allowance you would earn £2.00 in interest (assuming the interest rate stays the same throughout the year).

Source: https://www.halifax.co.uk/isas/cash-isas.html

I use the Halifax as an example other banks are available that could be paying more or less. The point is this, the paltry amount of interest paid by the banks could prove very costly to achieving your future plans and goals.

Let’s say, your cash ISA funds are intended to be used for something way in the future, say 10 years plus.  Maybe to supplement your retirement income or to help your kids with their university costs.

You see the thing is this, we are all a little more aware of inflation right now with the looming and present “cost of living crisis”.  The headline rate of inflation hit a 30 year high last month at 5.5%.  Not good for your long term savings if you are receiving 0.01% in interest.  Your capital needs to be earning 5.5% to keep its real purchasing power.

That’s £1,080 on a £20,000 investment rather than the £2 currently offered by the Halifax bank.

So what can be done about it.

Ask yourself this…

  1. What are your cash ISA savings for?
  2. Are they for spending or are they intended for your future
  3. Maybe a bit of both

As a financial adviser for over 20 years, this time of the year signals the start of our busiest period commonly referred to as “ISA Season”.

A time when we are working hard with clients both old and new to maximise their ISA allowances, revisit their financial goals and to present them with investments that offer greater growth opportunities to overcome the destroyer of your hard earned cash.  INFLATION.

If you’re weary of trying to make your cash ISA’s work for you, rather than the bank, get in touch for an ISA review.

I am ready to help bring your money to life.

* Interest rate shown is correct at time of writing.

Your capital is at risk. Equity investments do not afford the same capital security as deposit accounts. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Budget 2021

On 3rd March 2021, Chancellor Rishi Sunak delivered the Spring Budget. In this budget he announced the platform to discuss the ways in which the government had been supporting individuals and businesses throughout the Coronavirus pandemic so far, and to outline the ongoing challenges of securing both economic growth and eventually repaying the tax bill, in order to help stabilise the country.

The Chancellor recognises that that job losses and borrowing on this scale are only comparable with wartime rates and are not sustainable indefinitely.

Some changes that were rumoured to be announced, were not, particularly with regard to a change to the capital gains tax system, beyond the freezing of the annual exempt amount for several years, which is reflected across all tax bands.

HEADLINES

COVID-19 SUPPORT SCHEMES

The Coronavirus Job Support Scheme will be extended to September 2021 across the UK.

Employer contributions will increase to 10% from July and 20% in August and September.

SELF-EMPLOYMENT INCOME SUPPORT SCHEME (SEISS)

The Self-Employment Income Support Scheme (SEISS) has been extended to September 2021 across the UK. Those who filed a tax return in 2019/20 (up until midnight on 2nd March 2021) are now able to claim
for the first time.

Grants from the Self-Employment Income Support Scheme (SEISS) made on or after 6th April 2021 are to be taxed in the year of receipt. This measure will have effect for the tax year 2020 to 2021 and subsequent tax
years.

A new charge will be enforced if a person is not entitled to a Self-Employment Income Support Scheme (SEISS) payment. This measure will allow HMRC to recover payments where an individual subsequently ceases to be entitled to all or part of the grant. The individual is subject to a 100% tax charge if they receive a payment but are not entitled to it.

An exemption from income tax for the Covid-19 support scheme will be introduced for working households receiving tax credits payments.

CAPITAL GAINS TAX

The annual exempt amount will remain fixed at £12,300 until April 2026. There are no changes made to the CGT rates.

INHERITANCE TAX

The nil rate band will remain at £325,000 and the residence nil rate band will remain at £175,000 until April 2026. The residence nil rate band taper threshold is also frozen at £2 million until April 2026.

INCOME TAX

Personal Allowance is increasing to £12,570 for 2021/22 and the basic rate band is increasing to £37,700. This means a higher rate threshold of £50,270 – with the caveat that these figures will remain frozen until April
2026.

There are no changes to dividend allowance, personal savings allowance or starting rate band for savings.

Note: Changes to Personal Allowance will apply to the whole of the UK. Changes to the basic rate limit, and higher rate threshold, will only apply to non-savings, non-dividend income in England, Wales and Northern Ireland, and to savings and dividend income in the whole of the UK. Income tax rates and thresholds on non-savings, non-dividend income for Scottish taxpayers are set by the Scottish Parliament.

NATIONAL INSURANCE

The National Insurance Contribution Upper Earnings Limit and Upper Profits Limit will parallel the higher rate threshold of £50,270 for the UK from 2021/22 through to 2025/26.

PENSIONS
The Lifetime allowance for pensions remains at £1,073,100 until April 2026. With no changes announced to annual allowance, money purchase annual allowance or tapered annual allowance.

The government will ensure that collective money purchase pension schemes (or collective defined contribution schemes), to be introduced by the Pension Schemes Act 2021, can be used as registered pension
schemes for tax purposes.

The government are to remove preventative barriers in pension regulation that may be discouraging Defined Contribution pension schemes from investing in high-growth companies. The government will look to tap into the pool of capital available from institutional investors, particularly DC pension schemes, to assist in the redevelopment of
the country’s infrastructure and economic initiatives and will seek consultation on whether certain costs within the charge cap affect the ability of pension schemes to invest in a wider range of assets.

Investing funds held within UK pensions could provide a massive boost to the government’s economic redevelopment plans, as well and could enable savers to benefit from the long term returns on these investments. The FCA is to publish a consultation.

INVESTMENTS

ISA
The ISA subscription limit remains at £20,000 in 2021/22. The Junior ISA and Child Trust Fund subscription limits will remain at £9,000.

SOCIAL INVESTMENT TAX RELIEF (SITR)

The government is extending the operation of Social Investment Tax Relief (SITR) to April 2023. This will continue availability of Income tax relief and Capital Gains Tax hold-over relief for investors in qualifying
enterprises.

BUSINESSES
Corporation tax rates will be frozen at 19% for the tax years 2021/22 and 2022/23. It will increase to 25% in 2023/24. However, for companies with profits of up to £50,000, the rate will remain at 19%.

Tapering for companies will begin with profits over £50,000 but less than £250,000. This means only companies with profits above £250,000 incur the full 25% rate.

Companies with profits between £50,000 and £250,000 will be taxed at the main rate of 25% and will be eligible to claim marginal relief.

The government will temporarily extend the period in which businesses may carry-back trading losses from the initial one year to three years. The extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020/21 and 2021/22 by unincorporated businesses.

To prevent abuse, the amount of SME payable R&D tax credit that a company can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and National Insurance contributions liability. For accounting periods beginning on or after 1st April 2021.

Between 1st April 2021 and 31st March 2023, companies investing in qualifying new plant and machinery will benefit from new first-year capital allowances. This means investments in main-rate assets will see relief at 130% super-deduction, whilst investments in assets qualifying for special rate relief will benefit from a 50% first-year allowance.

The temporary £1,000,000 limit for the Annual Investment Allowance will be extended by one year. This change will have effect from 1st January 2021 to 31st December 2021.

STAMP DUTY LAND TAX (SDLT)

The SDLT temporary cut in England and Northern Ireland is extended until September. The £500,000 nil rate band will be extended until 30th June 2021 then it will be set at £250,000 until 30th September 2021. On 1st October 2021, this will return to its standard level of £125,000.

Contact us if you want more details on how the budget will effect you.

5 steps to successful investment planning

How to make the most of my money?

Investment planning starts with understanding what your aims are. It is then vital to establish what your attitude towards investment risk is and this is important for sensible investing.  We can help work out a level of risk that is right for you and your money and importantly advise you on a suitable investment approach.

Which arrangement is right for you?

There are many types of savings and investment, each having different structures, tax treatments and implications to you as the investor.  Stocks & Shares ISAs, Cash ISAs, Deposit accounts, Gilts, Insurance Bonds, Endowments, Annuities, Unit Trusts, Investment Trusts, to name a few. We can discuss with you what your aims are and recommend suitable ways to help you achieve them.

What are the right funds to invest in?

With thousands of funds to choose from, it can be an impossible task knowing which is the best solution for you. We can keep your portfolio up to date using our knowledge and experience and advise you on any relevant changes and invest in funds which we think will give you the chance of maximising your returns.

What is our approach to investing?

The key driver for selecting an investment solution is based on preferences which we believe create value for our clients:

  • Independence – we have access to the world’s best investment managers and fund houses.
  • Importance of cost – we aim to provide compelling investment solutions at low cost.
  • Diversification – is the “only free lunch to investing” and is key to a more enjoyable investment journey
  • Asset Allocation – we don’t put all our client’s money in one basket

Arrange an Investment Planning Review

Here at TKV Financial Management we can review your existing funds and lower the charges where possible. This could save you money each and every year.