Rishi Sunak has delivered his first budget under Boris Johnson’s government. So, was there anything of interest to note from a financial planning prospective this year? Steven Clemence, Chartered Financial Planner at TH March provides his reaction to the 2020 Budget.
A few years back accountants would send one of their number to collect the detail from London to take it back to their colleagues to then study the text overnight before publishing their tax tables and budget commentary. These days it is all done much more quickly and if you really want you too can download the full budget papers from GOV.UK yourself.
Back in the early nineties I was really pleased to be holding a budget seminar one week after the budget and it was before any of the local accountants had held theirs, so no cheating to find out what everyone else had to say first! The quickest I have had to work on the budget is being on the local radio in the afternoon of the budget having barely just turned the TV off after watching the speech.
What do you need to know to help you understand what this budget means for your finances? Nothing major, but some worthwhile bits both for some of the lowest earners and also for the high earners.
Savings and Investments
- The Personal Allowance stays the same, as does the Personal Savings Allowance. So, you still have to question the use of ISA’s for many
- ISA limit for us adults stays the same at £20,000
- If saving for the children then note that the Junior ISA limit has gone up, more than double to £9,000, as has the Child Trust Limit, but do you really want them to have full access to the money at the age of 18, just think what they might spend all that money on!
- The Capital Gains Tax (CGT) threshold is increasing to £12,300 for individuals
- Some complex stuff happens in working out tax if you cash in an insurance bond called top slicing relief. Following a court case last year the changes in legislation, confirmed in the budget, back up the decision reached by the court
- For low earners in a ‘Net Pay’ workplace pension who don’t benefit from tax relief on their pension contributions (which you can get, even as a non-taxpayer, on a personal pension) the Government has committed to reviewing the options to address the difference
- For many of the high earners (thanks to the NHS Consultants not wanting to work overtime and fall foul of this restriction) who have had the amount they can pay into a pension (without facing additional tax charges) restricted by something called the Tapered Annual Allowance the changes may give them back their full £40,000 Annual Allowance. This is good news. For very high earners there is a backwards step as the Annual Allowance could now be reduced to just £4,000
- For those with a lot in their Pension the Lifetime Allowance is increasing to £1,072,000, that is the amount of benefits you can take (crystallise is the word used) without paying additional tax charges
- The lifetime limit is changing from £10M to £1M, if you were planning to use this you might now need to think about other ways to extract the value out of your business, perhaps through a pension
Steve is a Chartered Financial Planner. He is also a Fellow of the Personal Finance Society. The award of a Fellowship reflects the level of advanced study undertaken by Steve together with his academic achievement, knowledge, ethics and experience.
The aim of TH March Financial Planning Limited is to expand on the wide range of services already offered by the group by providing a bespoke financial planning service that clients know they can have confidence in because it is backed by the highly respected reputation of TH March, whose name in the UK financial services industry is synonymous with quality, trust and expertise.