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Budget 2016: How will it affect your personal finances?

 

Budget 2016: How will it affect your

personal finances?

 

The political fallout from Budget 2016 has dominated the media- to the detriment of those who to know how their personal finances will be affected.

Here are 5 key Budget 2016 measures that could affect how you plan your personal finances:

Income tax

Both basic and higher rate tax payers will have smiled at the Chancellor’s final budget announcement. We already knew that the personal allowance was going to rise to £11,000 in April 2016.

However, the Chancellor revealed that this will rise yet further to £11,500 in 2017/18, keeping him on track to delivering his promise of a £12,500 allowance by 2020.

Higher rate taxpayers will also see their income tax bills cut, as the Chancellor announced that the higher rate threshold will increase from £42,385 to £45,000 in April 2017.

Capital gains tax

Many commentators had predicted changes to capital gains tax (CGT) would be included in previous budget statements, the UK rate being fairly uncompetitive compared to other developed countries. 2016 is the year the Chancellor made his move.

From April 2016, the higher rate of CGT will be cut from 28% to 20%, while the basic rate will fall from 18% to just 10%. The existing rates will remain in place for individuals who make gains on residential property (that doesn't qualify for private residence relief) and carried interest.

The ‘Lifetime ISA’

For all the criticism levied at the Chancellor over the budget, creativity is an area where we cannot fault him – especially when it comes to introducing a host of new acronyms into the dictionary for savings accounts.

First we had the New ISA ('NISA'). Then in 2015, we had the announcement of the Help to Buy ISA (or, ‘Help to BISA’).

In Budget 2016 we learned of the latest incarnation of ISA: the Lifetime ISA ('LISA').

From April 2017, people under 40 will be able to save into a LISA and receive a 25% government top-up on all savings held. Savers will be able to put away a maximum of £4,000 a year in these new savings accounts.

Insurance premium tax

After raising the rate of insurance premium tax from 6% to 9.5% in his 2015 Autumn Statement, the Chancellor has announced another increase, albeit a much smaller one.

From 1 October 2016, the rate will rise 0.5 percentage points to 10%. This may increase the costs of insuring everything from cars and contents, to homes and pets.

Duties

In a further boon to motorists who are already benefitting from the dip in oil prices, the Chancellor announced that fuel duty will remain frozen for another year.

Most alcohol duties have been frozen, except for wines and high-strength cider which will rise in line with the retail price index (RPI) rate of inflation.

Tobacco duty will rise 2% above RPI rate while a new sugar duty on soft drinks will be introduced in 2 years.

Contact us at geoffk@knightandcompany.co.uk or call 01628 631 056 for more information on how we can help you plan your personal finances.