From 11 Downing Street to yours
The 2017 Budget came and went with little to celebrate or to complain about – but there were still a few key areas of note which will impact on personal finances.
The main headline-grabbing announcement was one designed to appeal to the younger generation who have been struggling to take their first step on the housing ladder.
The decision to raise the stamp duty threshold to £300,000 for first time buyers will be widely welcomed – but perhaps more could have been done to help this generation.
If the Chancellor had increased the Lifetime Isa limit, which currently gives a £1,000 boost for a £4,000 investment, it would have been a real help to those who are investing towards their first home.
There were no changes made to Inheritance Tax which is a deeply unpopular tax causing a financial headache for many families.
However, the fact the HMRC has been given £155m towards additional resources and new technology could herald an intensification in the Government’s crackdown on Inheritance Tax.
HMRC is now on course to take a record £5.5bn from people’s estates this tax year and this extra investment should serve as a warning to business owners and wealthy individuals. Their taxes – and any reliefs they think they may be entitled to – will be under increased scrutiny.
This is why it is important for those who are facing an Inheritance Tax problem to speak to a financial adviser to ensure they secure all the reliefs they are entitled to.
The Budget contained changes to the Capital Gains Tax annual exempt amount which is set to increase from £11,300 to £11,700 from next year.
This extra allowance is a welcome boost for investors and second property owners as it will allow them to keep more of their money when they realise their gains. It will be worth a combined £23,400 for married couples and civil partners who have the advantage of being able to transfer assets between each other without triggering a Capital Gains Tax charge.
Both spouse’s annual exempt amounts can be used in full and potential tax bills can be cut further if one of the couple pays a lower rate of tax.
It was confirmed that the Pension Lifetime Allowance will increase by £30,000 from the current £1m limit. This change isn’t unexpected and is designed to ensure the allowance keeps pace with inflation.
The majority of taxpayers were given a little bit of good news as the personal allowance was increased from £11,500 to £11,850 meaning they can earn an additional £350 per year before being subject to Income Tax.
And with the higher rate threshold increased to £46,350 (from £45,000*) it means taxpayers can earn more before being subject to the 40% rate.
*UK excluding Scotland
Currently, a basic rate taxpayer who has a spouse/civil partner who is a non-taxpayer is allowed to claim up to 10 per cent of their unused personal allowance. This is worth £230 in the current tax year.
However, in the past if a person’s spouse died before the claim was made their surviving partner would not have been eligible for the funds. This has now been changed so that the surviving partner can now claim back the unused allowance. This can be backdated for up to four years.
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