What the budget means for you – Jasmine Birtles

If you were hanging on to Phillip Hammond’s every word on Monday 28th October, waiting to hear what changes he would be making for investors, you probably came away disappointed…or relieved.

Because frankly, this year’s Budget had remarkably little news for investors and savers.

In the main that was a good thing. In the run-up to the Budget analysts were widely predicting a raid of the pensions annual allowance and possibly a reduction in the ISA limits and changes to IHT exemptions. But no. Silence on all counts. It was largely a giveaway Budget with very little clawed back by the Chancellor – particularly for investors.

ISAs

For the tax year 2019/20 the annual ISA allowance remains at £20,000, and pension investors can still stash away £40,000. Neither are to be reduced which is a huge relief for anyone looking to build their retirement savings. Combining the two, which many investors do in order to make the most of their tax advantages, these allowances enable most people to invest in a nest egg tax-efficiently.

Also if you are an ISA investor who holds Alternative Investment Market (AIM) shares you can breathe a sigh of relief too. Since 2013, AIM shares have been allowed in ISAs, enabling ISA investors to create portfolios that are free of inheritance tax as well as income and capital gains tax. Investors will be glad not to have lost this in the last Budget.

There is also a positive move for parents investing for their children. The annual subscription limit for Junior ISAs for 2019-20 will be uprated in line with inflation to £4,368.

Income tax

The thresholds for income tax are also being tweaked. Continuing the government’s policy of the last few years, the personal tax free allowance is edging up, as is the higher rate tax threshold. Here’s what they’ll be for 2019/20:

Personal allowance – £12,500

Basic rate (20%) – £12,500-£50,000

Higher rate (40%) – £50,000-£150,000

Additional rate (45%) – £150,000+

For those earning over £100,000, the personal allowance works a bit differently. For every £2 over £100,000 that you earn, your personal allowance will be reduced by £1. So, if you earn £125,000 or more, you’ll have no personal allowance and will have to pay income tax on all of your earnings.

Stock market investing

There was little for stock market investors in this Budget, but some of the chancellor’s ideas will have an impact.

“Investors breathed a sigh of relief as the Chancellor maintained the status quo in terms of allowances,” says Moira O’Neill from Interactive Investor. “For example, over the years, chancellors have been fond of meddling with venture capital trusts and enterprise investment schemes, which grant investors appealing tax advantages for investing in early stage companies. But no sign of more with these regimes in this Budget.”

Last year there were unexpected cuts to the dividend tax allowance, which was reduced to £2,000, but the Chancellor did not wield the axe further this time. It was hoped that he might have reversed the cut this year and it was a shame that he didn’t, but at least it wasn’t increased.

The tax advantages of shares listed on the Alternative Investment Market (AIM), London’s junior market, were expected to be in the Chancellor’s line of fire, but also escaped.

Savings

In the ‘small print’ of the Budget announcement we heard a few bits of good news for savers.

For a start the minimum investment required to hold Premium Bonds will fall from £100 to just £25 by the end of next March, which will be welcomed by small savers and those who like to give Premium Bonds as a gift to children and grandchildren.

Also, the criteria for buying bonds as gifts for children under 16 will also be loosened going forward. The new rules say that aunts, uncles and family friends are now going to be allowed to gift bonds worth up to £50,000 per child. Currently they can only be bought by parents, grandparents and legal guardians. National Savings & Investments will release further details of these changes later.

Still on the subject of saving for children, a consultation on draft regulations for maturing Child Trust Fund accounts will be published next year, as announced in the Budget. These were launched in 2002, but were then superseded by Junior ISAs in 2011. The Budget also included news that the annual subscription limit for Child Trust Funds for 2019-20 will be uprated in line with consumer prices index to £4,368.

For more information

To find out more about the Funding Circle ISA visit fundingcircle.com/innovative-finance-isa.

By lending to businesses your capital is at risk. The tax-free entitlement of an ISA depends on your individual circumstances and may change.

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Jasmine Birtles