Budget 2016 Summary

We are pleased to share the following budget update on behalf of our partner ProgenyWealth. ProgenyWealth specialises in financial planning for both individuals and corporates, whose needs and resources are often beyond the scope of conventional Financial Advisors. 

“Yesterday we saw George Osborne’s 8^th budget as Chancellor of the Exchequer. For those of you that run or own businesses there will be much to discuss with your Accountants, but as Wealth Planners we just wanted to highlight a few key changes that will affect us all as private individuals.

Personal Tax Allowances

Personal allowance will increase from £10,600 (2015-16) to £11,000 (2016-17), and then to £11,500 from April 2017.

The higher rate tax band increases from £42,385 (2015-16), to £43,000 in 2016-17 and to £45,000 from April 2017.

Capital Gains Tax (CGT) – the Headline and the small print

The headline was the announcement of an 8% decrease in Capital Gains Tax (CGT). As from the 6^th April 2016 there will be a reduction from 18% to 10% for Basic Rate tax payers and from 28% to 20% for Higher Rate tax payers.

However, the small print informs us this is NOT applicable to Residential Property or carried interest. So those of us with buy-to-lets or second homes, CGT will remain taxable at 18% and 28% respectively.

Entrepreneurs Relief – Extends to the small investor 

The extension of Entrepreneurs Relief now means long term investors (3yrs minimum) will be taxed at a rate of 10% on disposals of shares (purchased on or after 17^th March 2016) in unlisted trading companies, subject to a maximum lifetime limit of £10m.

This will be in addition to the usual Entrepreneurs Relief, where you had to have at least 5% of the share capital and voting rights for at least 12 months prior to the sale.

It remains to be seen how the new relief will impact on Enterprise Investment Schemes (EIS) where gains are fully tax exempt and investors can qualify for Income Tax relief at 30% of the original investment.

ISAs – All change from 2017 

From 6^th April 2017 we will receive an increased ISA allowance of £20,000. We will also see the introduction of a Lifetime ISA (LISA).

The LISA targets individuals between the ages of 18 and 40 to save a maximum of £4,000 each tax year to benefit from a Government bonus. Savings made before a person’s 50^th birthday will receive an added 25% bonus from the Government.

The savings and Government bonus can be withdrawn to help to buy a first home (up to a maximum value of £450,000), or at age 60 to help fund retirement.

Alternatively, the savings alone can be withdrawn at any time before age 60 but will incur a loss of the Government bonus, as well as any interest or growth and a 5% early withdrawal charge will apply (unless the monies are used to help buy a first home).

Pensions – No news is good news

With the exception of the reduction in the Lifetime Allowance from £1.25 million to £1 million, which will be effective from April 2016 and the tapering of Annual Allowance for High earners which has already been well reported (Adjusted income of £150K + will see a reduced annual allowance of £1 for every £2 earned, to a minimum allowance of £10k per year), there has been no major change to the taxation of pensions.

Up until last week our industry had been expecting the possible loss of Higher Rate Tax Relief and possibly the loss of NI savings through Salary Sacrifice. On 5^th March the BBC broke the news that George Osborne had dropped plans to cut tax relief, which left many expecting Salary Sacrifice to go.

The good news is that whilst the Government has said in the budget that it is “considering limiting the range of benefits that attract Income Tax and NICs advantages when they are provided as part of salary sacrifice schemes. Salary sacrifice for pension saving, childcare and health related benefits such as the cycle to work scheme will continue to be allowed.”

So no actual changes in this budget but this is an indication of what may lie ahead. However, for the time being Salary Sacrifice schemes continue to offer savings to employers and employees.”

This list is by no means exhaustive and is simply meant to highlight a few changes we think are particularly pertinent. If you would like to discuss any of the points we have raised or wider budgetary reforms, please feel free to contact the ProgenyWealth team and we’ll be happy to help. 

James Honeyman Wealth Management Consultant Tel: 0203 284 5071 Mobile: 07984 952345 Email: JHoneyman@ProgenyWealth.com	Andrew Troke Wealth Management Consultant Tel: 0203 284 5071 Mobile: 07949 191452 Email: ATroke@ProgenyWealth.com
ProgenyWealth Floor 6, Dudley House 169 Piccadilly LONDON W1J 9EH	ProgenyWealth Floor 6, Dudley House 169 Piccadilly LONDON W1J 9EH