This was the last budget before the next general election is to be held, so we were expecting some big announcements and a rabbit out of the hat approach.  Neither were forthcoming as, whilst the cut in National Insurance was sizable in the amount will cost the Treasury nearly £10bn, it comes at the expense of public services which will fall by an estimated £20bn in order to meet the Chancellor’s fiscal plans, according to the Institute for Fiscal Studies.

The talk of a cut in the basic rate of income tax was quickly squashed on the morning of the budget, so there was no rabbit out of the hat moment, as there is simply no fiscal room to allow this.  Furthermore, the key objective is to keep inflation under control and to allow scope for the Bank of England to reduce interest rates in the short to medium term. 

Following the fallout from the Truss/Kwarteng budget, the Tories, and for that matter our economy, can ill afford another unfunded ‘giveaway budget’.   

One of the biggest changes for investors is the introduction of a ‘British ISA’, which will allow investors to contribute a further £5,000 (on top of the current £20,000 allowance) into a tax efficient investment.  It is still at the consultation stage and there is no set timeline for its introduction, so the idea has already received a cautious welcome.

In summary, there have been no big announcements which will have a significant impact on clients’ portfolios in the immediate future, however, below are the main points:

Key Points

  • National Insurance cut by 2p from April, from 10% to 8%
  • 5p cut to fuel duty to continue for 12 months
  • Alcohol duty frozen until February 2025
  • Abolishment of the non-dom status
  • Introduction of the British ISA – allowing an additional £5,000 to be invested into an ISA
  • Reduction of higher capital gains tax rate on property from 28% to 24%
  • Higher Income Child Benefit Charge threshold raised from £50,000 to £60,000
  • Threshold for VAT for business has been raised to £90,000

Savings Allowances

The vast majority of your personal savings allowances will remain the same, below is a recap:

  • Income tax personal allowance will remain fixed at £12,570 until 2028
  • Marriage allowance transfer (an amount of £1,260 can be transferred to spouse or civil partner) – potential income tax saving of £250 per year
  • Savings allowance – (tax on interest received from banks and building societies) basic rate taxpayers have a £1,000 allowance, with higher rate taxpayers allowance dropping to £500.  There continues to be no allowance for additional rate taxpayers.

Tax on Dividends

  • The dividend allowance continues to be free of tax for the first £1,000, but will reduce to £500 from 6th April
  • Dividends in excess of the £1,000 are charged as follows:
  • 8.75% for basic rate taxpayers
  • 33.75% for higher rate taxpayers
  • 39.35% for additional rate taxpayers

Pension Tax Limits

  • Annual allowance remains at £60,000
  • Individuals with income greater than £200,000 have their annual allowance restricted by £1 for every £2 of ‘adjusted income’ over £260,000 to a minimum allowance of £10,000
  • The Lifetime Allowance will be abolished from 6th April 2024 with the maximum tax-free cash set at £268,275

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