The Budget- What about financial planning?

There’s a lot to report in today’s budget, but for those of us involved in Financial Advice, it was an ice cold budget this time round; it seems pretty much everything is… frozen.

• Personal Income tax allowance (£12,570*)

• Higher Rate Income tax allowance (£50,270*)

• Inheritance Tax Nil Rate Band (£325,000)

• Pension Lifetime Allowances (£1,037,100)

• Capital Gains Tax allowance (£12,300)

*note these were due to go up from £12,500 and £50,000 in April anyway, but will then be frozen for 5 years! (yes 5 Years!)

Does this still have an impact? Yes:

• It’s always worth remembering that ‘freezing’ really means ‘reducing’ when we take account of inflation, we’re more used to seeing small increases each year, but clearly the government cannot afford to be giving anything away right now.

• If you are currently just below one of the income tax thresholds and find yourself with a pay rise, there may be opportunity to reduce your tax payable using, for example, pension contributions.

• Freezing them makes using these allowances effectively even more important. We need to make sure we utilise Capital Gains Tax (CGT) allowances ever year, maximise ISAs, and ensure everyone is using Income Tax We have tools to utilise them all in different ways, and if we don’t use them in a tax year, they’re lost.

• Markets have been strong lately, and there was some expectation that Capital Gains Tax rates were to increase, but they remain at quite low rates (10% and 20% in most cases). This should may provide further opportunity to crystallise some gains without paying a high tax rate.

Also announced are the new ‘Green Bonds’ to help finance the transition to net zero by 2050. It will be interesting to see what rates these may pay, and what projects they will fund.

If this sort of investment is of interest to you, do also remember to contact us about the AG Sustainable Investment options.

Finally, whilst there’s no doubt that the economy has an uphill task ahead, for very obvious reasons, there are some real positives to note: The growth forecasts for the economy are up, unemployment is (at least currently) lower than predicted, and support will continue for many who need it.