Budget 2018 – our analysis

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This afternoon saw Chancellor Philip Hammond deliver his final Budget before Brexit with an overall message focused on meeting the Prime Minister’s pledge of ending austerity. Let’s take a look at some of the key announcements and what they could mean for your personal finances:


Income tax

The personal tax-free allowance – the amount you can earn before you start paying income tax – will increase from £11,850 to £12,500 from April 2019 instead of April 2020.

Similarly, we saw an increase to the higher-rate threshold – the maximum amount you can earn before you pay income tax at the higher-rate – being brought forward a year. The Chancellor announced that this would increase from £46,350 in England, Wales and Northern Ireland to £50,000.

These may not be huge increases but anything that could mean paying less income tax is good news.

Scotland has different bandings for income tax and we will have to wait until the Scottish Budget later this year to see if any similar changes are made to those.

Laws and tax rules can change. Your personal circumstances will also have an impact on tax treatment.

Making sure that personal allowances aren’t wasted can be a good foundation for a plan to make sure you aren’t paying more tax than you need to, so it’s worth keeping this under review with your adviser.



The budget was pretty quiet in terms of pensions – reassuringly, there are no changes to pension annual allowance (AA). The standard AA remains at £40,000, the money purchase AA stays at £4,000 (with no carry forward) and there are no changes to the high income AA taper rules.

The Lifetime Allowance however is due to increase, in line with CPI inflation, to £1,054,800 from April 2019. This is welcome additional headroom for those approaching and in retirement whose funds are close to the threshold.


Inheritance tax (IHT)

As expected, the IHT nil rate band will remain frozen at £325,000. If property prices continue to rise, this freeze will see more and more people tipping over the IHT limit and leaving an inheritance tax for their beneficiaries.  There are lots of ways to reduce a potential inheritance tax liability so it’s worth seeking tax advice if you’d like to make sure you’re leaving as much as possible to your loved ones.

As a result, the residence nil rate band will become a hugely important inheritance tax tool for maximising what beneficiaries receive. The residence nil rate band will increase from £125,000 to £150,000 from April 2019, allowing some couples to leave up to £950,000 to future generations free of IHT so it’s worth checking your eligibility to benefit from residence nil rate and taking steps to secure it. Your 1825 adviser can help you with this.


Trust taxation

The outcome of a consultation aimed at simplifying the tax rules for trusts is still awaited.

Trusts can be a great way to pass on wealth yet still retain some control over how and when money is received by the beneficiaries. However, trust tax rules are notoriously complex so any effort to make these easier to understand for people looking to use them is welcome.


Individual Saving Accounts (ISAs)

The annual ISA limits stay at £20,000 per person, with no reduction in the range of ISA options available to meet different needs, but there has been a change to the threshold for the Junior ISA.

An ISA can play an important role in savings and planning your finances and, if you’re nearing the £20,000 limit, it’s really important you give consideration to whether or not you’re using the right saving and investments vehicles for the excess. As with all investments, their value can go down as well as up, and could be worth less than what was paid in. If you’re unsure, this is something your financial planner can help with.


Stamp duty

Stamp duty has been abolished with immediate effect for all first time shared-ownership buyers in England and Northern Ireland who purchase a property up to the value of £500,000.

This change will also be backdated to 22 November 2017 so anyone who is eligible will be able to amend their tax return to claim a refund.

We will have to see whether any changes are made to the Land and Buildings Transaction Tax (the Scottish version of Stamp Duty) in the Scottish Budget.


Capital gains tax

The capital gains tax allowance will increase by £300 to £12,000 from April 2019. Use of the capital gain tax allowance is an important aspect of tax efficient planning so any increase in this is likely to be a positive for those holding assets that generate gains.


Entrepreneurs’ relief

The Chancellor decided not to scrap entrepreneurs’ relief, but has tightened the qualifying conditions.

To ensure it is going to genuine entrepreneurs, the government will extend the minimum qualifying period from 12 months to two years.

If you have questions about how any of the announcements could affect your financial plan, please get in touch.


Laws and tax rules may change in the future. The information here is based on our understanding in October 2018. Personal circumstances also have an impact on tax treatment. The information in this blog or any response to comments should not be regarded as financial advice.


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