Introduction

I am a self-confessed political junkie, so I enjoyed watching Philip Hammond deliver his first Budget.  There is something rather winning about his delivery; he is mostly deadpan which means that when he cracks a joke, it is surprisingly funny.  He was in playful form with jokes aplenty at the expense of the Labour frontbench who looked collectively as if they were attending a funeral not a budget speech.  The Chancellor has a thoughtful, measured and confident delivery giving the impression of a man whom you could trust in a crisis.   Given the uncertainty over the coming months, as we negotiate our exit from the EU, this is just as well.

I will restrict my analysis to how I believe the Budget affects clients and in particular, savers.  As usual, most of the measures announced in yesterday’s Budget look a year ahead.  But what follows is not just a list of key measures for the tax year starting 6th April 2018, but a reminder of what is coming up shortly in the year commencing 6th April 2017 (rUK clients will forgive me for adding Scottish tax rates, where relevant).

Income Tax & National Insurance (NI)

  • Tax free personal allowances increase by £500 to £11,500 from 6th April 2017;
  • Dividend tax – no changes to the tax rates but in the year commencing 6th April 2018, the tax free amount reduces from £5,000 to £2,000.  (Comment this will hit all savers but in particular, it will hit self-employed individuals trading through a company who currently take dividends rather than salary to avoid NI).
  • The threshold above which you pay 40% tax increases from £32,000 to £33,500 from 6th April 2017 (In Scotland, the threshold is £31,500, resulting in an extra annual tax bill for 40% Scottish taxpayers of £400).
  • From 6th April 2018, Class 2 NI will be abolished and Class 4NI will rise from 9% to 10% (11% from 6th April 2019). (Comment Hammond has been accused of breaking a conservative manifesto pledge but he defends this in the interests of “fairness.”)

Capital Gains Tax (CGT)

Inheritance Tax (no changes)

Pensions

Amazingly, only one change for 2017/18 affecting those over 55, who have taken income from their pension under the flexible regime introduced in April 2015. The amount that they can contribute into their pension is reduced from £10,000 to £4,000 per annum with effect 6th April 2017. Pensions are ridiculously complicated, so look before you leap, i.e. contact Victoria or myself before you act. (For more on pensions go to the link on our website www.hamilton-financial.co.uk).

ISAs

The good news is that from 6th April 2017, i.e. in less than a month’s time, the annual ISA allowance increases from £15,240 to £20,000. (Comment given dividend tax and the proposed reduction in the tax free dividend allowance from £5,000 to £2,000 starting in 2018/19, you should strain every financial muscle to use up your ISA allowance. If you don’t have the cash but you have existing investments outside the ISA “wrapper”, make sure you sell these down, putting the proceeds into a stocks & shares ISA and repurchase the shares within the ISA tax wrapper (Bed and ISA). Again if you have any questions contact Victoria or me on 0131 315 4888.

People

Matthew Kirkwood, who has been with us for 4 years, has just left us to embark on a delayed “gap year”. He has been a wonderful friend and we wish him God speed and bon voyage. Loren Veitch joined us in January to start a financial planning apprenticeship. She was brought up in the Scottish Borders and comes to us with a first in maths.

Advisory v Discretionary

We are advisory investment managers not discretionary. This has two advantages for clients. Firstly, we don’t add 20% VAT onto our charges. And secondly, we cannot invest clients’ money without their agreement. We have found that clients rather like the consultation process.

Testimonials

I am rather a cynic when I read testimonials on websites. So you are entitled to be equally sceptical with comments recently received from two customers:-

“Many thanks for all your great works and clever investments since joining up with you. Please proceed as you see fit, I have complete trust in your recommendations”.

“We really appreciate all the help from you and your colleagues in getting us set up for retirement and sorting out all our pension stuff”.

If you have managed to get to the end of this budget bulletin without falling asleep, very best wishes from Victoria, Peter, Martin, Loren and me.

Andrew Hamilton CTA DipPFS
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