Spring Budget: There were some colourful moments!

Chancellor Philip Hammond caused quite a stir in his first Budget with the fuss over increased National Insurance contributions for the self-employed.

First he was accused of breaking a Tory manifesto pledge, then Prime Minister Theresa May said a Bill on the changes would not be introduced until the autumn, and now he has dramatically announced he is abandoning the plans!

He said: “It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit of the commitments that were made.

“In the light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measure set out in the Budget.”

With all the fuss generated by the NICs, perhaps other issues raised in the Budget have been harder to get to grips with.

Here are a few Budget items to consider when you are thinking about your pensions and investments.

Inheritance Tax

It was confirmed that the new Residence Nil Rate Band will come into effect from April 2017. It starts off at £100,000 for 2017/18 rising to £175,000 by 2020/21. This will work in tandem with the existing £325,000 threshold for paying Inheritance Tax

It means by 2020 a couple could pass on £1million to their children and grandchildren free of Inheritance Tax. But, of course, there are rules and regulations to consider in conjunction with this so consult your financial adviser.

Interest on Collective Tax Investments

It was also confirmed that with effect from 2017/18 interest on Collective Investments is to be paid gross to the individual investor with no basic rate tax deduction.  Not paying tax at source on your investments is a bonus, but less so if you are drawn into a self assessment return.

Careful planning is required to ensure your investments are working tax efficiently so contact us for a free consultation.

Dividend Allowance

The tax free £5,000 a year Dividend Allowance introduced in 2016/2017 will continue in 2017/18. But in an unexpected move, the Chancellor announced this would reduce to £2,000 in 2018/19 in a measure targeted primarily at businesses, but also affecting investors in stocks and shares.

There are so many tax allowances currently affecting your savings (savings allowance, dividend allowance, starting rate band and so on), the tax system has never been so complicated. Having so many allowances also brings opportunities to save tax and boost investment returns so expert advice has never been more important.

Clients should consider the implications of this with their financial adviser to check their investments are working efficiently with these changes.

Pensions

The main changes in pensions came in the Money Purchase Annual Allowance which will reduce from its current level of £10,000 to £4,000 from 6th April 2017. The MPPA applies to individuals who access their pension benefits flexibly whilst they are continuing to work.

But despite this, pensions have never been more tax efficient, so taking advice on how to get the best out of it is essential to ensure the best returns.

And with the existing £150 income tax and national insurance relief for employer-arranged financial advice increasing to £500 from April 2017, there has never been a better time to seek advice.

For help with your pensions and investments and any queries on issues raised by the Budget, call the experts at Innes Reid on 01244 347583 or email info@innesried.co.uk

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