Chancellor of the Exchequer Philip Hammond will deliver his Autumn Budget next Wednesday (23rd November). The political backdrop means it is going to be a tricky balancing act. The government has a small majority, there have been high profile Cabinet resignations in recent weeks and Brexit negotiations appear to have stalled.
All of these issues might prevent surprise announcements, however, what areas should you look out for?
- Changes to Stamp Duty
There is talk of a change to stamp duty to help younger voters get on the property ladder. The Chancellor may decide to assist first-time buyers and those over the normal age of retirement. This would encourage older home owners to downsize meaning more family homes come onto the market.
Pensions have been a favourite area to tinker with and are often seen as an easy target.
The amount that can be built up in a pension without being subject to a tax charge (known as the lifetime allowance) has been reduced and capped to £1m.
The maximum amount that can be contributed into a pension on an annual basis (known as the annual allowance) has also been significantly cut over recent years. High earners now face a complex tapered annual allowance which can limit pension contributions to as little as £10,000 per year.
If the Chancellor does reform Stamp Duty he may raid the pension piggy bank to help fund any changes.
- Dividend Taxation
In his previous Budget, the Chancellor announced plans to cut the annual tax-free dividend allowance from £5,000 to £2,000 from April 2018, however, due to the snap General Election in June, the measure never made it into the Finance Act.
It seems reasonable to assume that this planned cut will be reintroduced. If this does happen it would impact directors of small companies who pay themselves via dividends rather than salary for tax and National Insurance reasons.
Another category of people effected are those who hold shares or investment funds outside of tax efficient arrangements such as ISAs and pensions. Anyone in this situation ought to consider moving these assets into tax efficient arrangements through ‘Bed and ISA’ or ‘Bed and Pension’ processes.
- ISA Allowances
ISA allowances have increased in line with inflation for several years now, however, the recent spike in UK inflation may persuade the Chancellor to freeze the allowance at £20,000.
Remember, with ISA allowances you either use it or lose it so it is important to make the most of this tax break if possible.
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