The dust is settling after Chancellor Phillip Hammond’s budget (last week). What promised to be a fairly quiet budget, constrained by the need for caution in the run up to Brexit, turned out to be more controversial than we expected.
Some highlights which are worth noting from a financial planning perspective…
- The limit on paying into a pension once it has gone into payment has decreased from £10,000 to £4,000 to reduce “pension recycling”
- As previously announced the ISA subscription limit will increase to £20,000 in 2017/18 and the Junior ISA will increase to £4,128.
- The 2016 Budget introduced the Lifetime ISA (LISA) and this will launch on the 6 April 2017. LISAs are available to savers and investors aged 18 to 40. For every £1 paid into a LISA the Government will add a bonus of 25 pence.
- Dividend tax free allowance reduced to £2,000 from 6 April 2018.
Stealing the headlines were the increases on Class 4 National Insurance contributions for the self-employed. Seemingly the most contentious announcement as the week went on it looked as though the Prime Minister may put the brakes on this change.
The Conservative’s manifesto pledge to not increase NI or income tax at the last general election has been called into question. Theresa May took the heat out of the situation by promising the changes would not be made before a government paper on the rights of the self-employed has been published in the Summer and given due consideration but just a week on from the announcement Phillip Hammond has decided to withdraw the measure. This must be the fastest budget U-turn ever, however given the concessions given to the self-employed with the abolition of Class 2 NIC and the increase in benefits available I’m sure we will see changes to Class 4 NIC back on the table at the next Parliament.
See a full summary HERE.