What does the Budget mean for individuals and their taxes?
The Chancellor, Philip Hammond, said the budget would pave the way for a “brighter future” for Britain and promised “the era of austerity is finally coming to an end”. But what does this mean to the individual?
Perhaps the biggest news to come out of the Budget was Chancellor Hammond’s pledge to increase the Personal Tax Allowance to £12,500, a year earlier than pledged, from April 2019. The new threshold will effectively mean an increase of £130 a year for most workers. The higher rate threshold (the point at which someone becomes liable to pay the 40 percent tax rate), will increase from £46,350 to £50,000.
In terms of personal tax, people will enjoy a freeze on fuel duties, for the 9th year in a row, meaning the average car driver will have saved £1,000 a year and van drivers £2,500 a year had the rates kept in line with inflation. Meanwhile, moving from road to air, airline passenger duty will remain unchanged for short haul flights.
Drinkers raised a glass in thanks, with a freeze on the duty on beer, cider and spirits, the Chancellor’s offering to “patrons of the great British pub.” However, those who favour wine as their tipple did not fare so well with the tax charged on wine rising in line with inflation, from February 2019, adding 7p to a bottle of still wine and 9p to a bottle of sparkling wine. Smokers will see a further rise in the cost of tobacco, with a tax increase in line with inflation plus 2%.
At first glance, a reduction of pension tax reliefs for high earners hasn’t appeared, keeping contribution allowances at £40k per year and the Lifetime Allowance continuing to see an inflationary increase in April 2019. The annual ISA allowance of £20k has been frozen.
Those looking to get on the property ladder have been offered help. Most first-time buyers of shared ownership properties will now no longer pay stamp duty. This means that individuals buying between 25% and 75% of a home and the rest owned by a housing association. It will apply to shared ownership homes up to the value of £500,000 and will also be backdated for people who have purchased an eligible property since last year’s Budget. The Chancellor also extended the Help to Buy scheme by a further two years.
However, other property owners did not come out of the budget so positively. There were hits to Private Residence Relief for some residential property owners selling their home, where they will have less time to sell after they have left the property and claim full exemption on the profit – this is reduced by half from 18 months to just 9 months of non-occupancy. In addition, those who let their previous home will have their access to “Lettings Relief” on the sale profit taken away unless they continue to live in the property with their tenants.
So, the two key takeaways are tax cuts for most and earlier than planned; and changes to the property sector – good news for some buyers, bad news for some landlords.
To find out more join us for our annual post-budget round up on November 1st at York racecourse. Find out more here https://www.garbutt-elliott.co.uk/events/