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Kirk Rice Blog

Budget TimeWritten on March 23, 2016 by Peter Sharratt

Last Wednesday, I watched the Chancellor deliver the budget whilst munching on my lunch; I did not choke on it so I guess it was an ok one (Budget not my lunch).

Some key points as follows: The Lifetime ISA will be introduced on the 6 April 2017.  This aims to remove what the government sees as a dilemma for young savers; save for a house or retirement?  It will be available for anyone under 40 and the maximum they can save is £4,000pa and a bonus of 25% will be added to each contribution.  Contributions, including the Bonus can continue to age 50.  The money, including the bonus, can be used to help buy a FIRST home (maximum purchase price of £450,000) any time after 12 months and/or can be withdrawn from age 60 for use in retirement.  The dilemma young savers face in the future is which one to spend it on.  Withdrawals can be taken out for other purposes at any time, but there will be a 5% charge and the bonus plus growth attributable to this part will be paid back to the government.  The government is considering if the money should be available for other ‘life time’ events (marriage/birth of a child?) and also looking at the possibility of being able to borrow from it without incurring a charge.  The Help to Buy ISA will be available until November 2019 and it can be paid into and in addition to the Lifetime ISA, but the bonus will only apply to one of the accounts for the first house purchase.

The general ISA Allowance will increase from the current £15,240 to £20,000 as of the 6 April 2017.  I assume this is in addition to the Lifetime ISA. From the 6 April 2016 Capital Gains Tax (on gains overs the annual CGT Allowance, currently £11,100) will reduce from 28% to 18% for Higher Rate Tax Payers and from 18% to 10% for Basic Rate Tax Payers.  However, this does NOT apply to gains made on Residential Property (BTL, holiday homes); CGT in this instance remains at the current rates.  Please note; Main Residence Properties remain CGT exempt. A Help to Save Account will be introduced no later than April 2018.  Individuals in low income working households will be able to save £50pm and receive a 50% government bonus after 2 years.  They can then continue to save under the scheme for a further 2 years.  Contrary to speculation Pensions received minimal attention.  The government will ensure that the (pensions) industry, designs, funds and launches a Pensions Dashboard by 2019. This will allow people to view all their pensions in once place.  Useful if you have a collection of Pensions. Salary Sacrifice allows employees to give up some of their salary in return for other benefits and it is commonly used for Group Personal Pensions.  The main advantage is the employee and employer both save National Insurance (NI) via Salary Sacrifice.  There can also be some tax advantages.  The government is going to consider limiting the range of benefits Salary Sacrifice can be used for but they state it is not their intention to exclude Pensions.  Great news, especially for employers who have to pay NI at 13.80%.

Click here to read our Full Budget Summary

As usual, we are on hand to help you if you would like to discuss any of the issues raised in the Spring Budget in further details. We will be pleased to hear from you. Please call 01344 875000 or email graham.jennings@kirkrice.co.uk or peter.sharratt@kirkrice.co.uk to discuss how this may affect you.