The Chancellor, George Osborne announced his Spring 2016 budget on Wednesday 16th March. We explain the main points from the announcement and how it might affect your finances.
Mr. Osborne set the scene for the budget by explaining that the long-term picture remains uncertain, and went on to deliver what he described as a budget for the next generation, which included measures aimed at tackling long-standing problems. One such problem is house prices, for which he outlined measures to help people under 40 to save more tax-efficiently for a home. Others included obesity, which saw the introduction – as widely expected – of a 20% sugar tax on soft drinks to be introduced by 2018.
We have reviewed the budget to see how it may affect your finances, and our Managing Director, Nigel Stallworthy comments:
“A few small changes to pensions legislation were announced and are mainly around supporting 2015 changes affecting death benefits.
“The Lifetime Allowance – which is the maximum that can be held in a pensions pot without suffering tax – has reduced from £1.25 million to £1 million. Anyone who thinks they may be affected by this may consider seeking protection after April 2016 to secure the higher Lifetime Allowance of £1.25 million, but no further pension contributions can be paid after 6th April 2016.
“We welcome the announcement that there will be an increase in the ISA allowance to £20,000 in April 2017 from £15,240 as it currently allows. This will generate significant opportunities for tax free savings.
“A key area of interest is the launch of the Lifetime ISA allowing anyone under 40 to save £4,000 per annum on to which the Government will add a bonus of 25%. There are restrictions on how these savings can be spent which is either to help first time buyers to buy a home up to £450,000 or to supplement their income from age 60. The impact of this is at the point that millions of under 40s have started pension saving for the first time via workplace pensions, the Chancellor has set up a rival product which risks causing mass confusion.
Young savers who opt out of pensions in favour of a Lifetime ISA will lose the contribution from their employer and the chance to build a tax free lump sum from a pension pot. It’s important that they understand the full picture and find out which option is right for them.”
We’ve put together a detailed guide to the Spring 2016 Budget, to help you understand how it may affect you or your business.