Autumn Budget 2018 – What you need to know
On 29th October 2018, Philip Hammond announced the Autumn Budget. This is to be the last such budget before Brexit comes into force and there were many positive takeaways. Unemployment is at its lowest rate since the 1970’ (at a rate of 4%), the deficit has fallen to its lowest level since 2001 and the funding of a multi-year budget for the NHS will see an increase of £20.5 billion a year in real terms by 2023/24..
The Office for Budget responsibility (OBR) raised its economic growth forecast for 2019 to 1.6% an increase of 0.3% made earlier in the year.
As a pension provider, there were many expectations that pension legislation was going to change, especially considering the subject had been let off lightly in previous years. Would the Chancellor announce a reduction to the annual allowance? Would the tax relief rules change or would the Chancellor abolish the Lifetime Allowance all together? The Chancellor did not make any of these change and another year has now passed without any major changes that concern the pensions industry. However, we have outlined some of the major announcements you might want to be aware of.
- As planned, the Lifetime Allowance will increase on 6th April 2019 to £1,055,000 from £1,030,000.
- The legislation to introduce a ban on pension cold calling will come into force 21 days from 29th October 2018. This is something that will be welcomed after previous delays to introduce the legislation. The ban will introduce measures to stop unregulated and 3rd party companies within the United Kingdom cold calling individuals. The ban will also extend to emails, texts and messages via social media. The ban will be enforced by the Information Commissions Office (ICO) which can fine companies up to £500,000 for unsolicited calls.
The introduction of the legislation will mean that unless individuals have prior relationship with a FCA regulated company/advisor or an individual has provided prior consent to opt-in to receive relevant communications, it will be illegal for them to be contacted about pension investments or transferring the pensions. This has become a major issue in the past, resulting in some very large scams and individuals losing their pension funds.
Many people have called for the scope of unsolicited calls to be extended to other investment platforms such as ISAs, however, the government announced no immediate plans for this and have elected to place pensions as a priority.
- The government is also going to spend £5m on the pension dashboard project. Once live, the pension dashboard allow individuals to view all pension pots In one place. This will benefit those who have had multiple pensions from different previous employments.
- The ISA subscription for over 18’s will remain at £20,000 for the 2019/2020 tax year, however, Junior ISAs will increase from £4,128 to £4,368.
- The personal allowance increase to £12,500 will be brought forward one year from 6th April 2020 to 6th April 2019. Individuals will now be able to earn up £12,500 without being subject to any income tax. This increase also means that the higher rate threshold is going to increase to £50,000 which will bring approximately 1 million individuals into the basic rate threshold.
- Capital Gains Tax (CGT) relief will be limited to prevent owners from abusing the system and not using their homes as main residences.
- First-time buyers will be exempt from Stamp Duty on shared ownership homes up to £500,000.
- The government also announced a UK Digital Services Tax which will be implemented in 2020 on large online search engines such as Google and Amazon. The tax will be at a rate of 2% on revenue generated from UK business. This tax is thought to bring in £400M to the government.
- The National Living Wage is being increased in April 2019 to £8.21 an hour from £7.83, a 4.9% increase.
- Fuel duty is being frozen for a 9th consecutive year, tax in beer and spirits is being frozen for another year, however, tax on tobacco products will increase by inflation plus 2%.
- Subject to a consultation, the government is planning to introduce a new tax on plastic packaging which is another step in their efforts on tackling the single-use plastic waste epidemic that the world is currently experiencing.