Budget 2018: Personal Tax

While, overall a largely uneventful Budget for savers, there are four pertinent points to be aware of.

While not quite a rabbit out of the hat, the Chancellor did bring forward the increase to the income tax threshold from April 2020 to April 2019. As such, from next April, the personal allowance will increase to £12,500 while an individual will not pay tax at 40% until their income exceeds £50,000. This presents an opportunity for those in retirement to review the way in which they are drawing income to ensure it is structured in a tax efficient manner.

Despite some fears of a raid on pension tax relief, it remains business as usual for pension savers. After a number of budgets which fundamentally changed the pension landscape, Autumn 2018 was uneventful for both those drawing from and accumulating their pension. The lifetime allowance continues to increase in line with CPI  rising to £1,055,000 from April 2019. Further, Fixed Protection 2016, which allows one to fix their lifetime allowance at £1.25 million remains available for those who meet the criteria. As such, pension savers should remain vigilant as to their position in relation to the lifetime allowance and whether remedial action is required.    

There was some good news for those saving for their children. NS&I will allow people other than parents and grandparents to gift Premium Bonds to a child. This, alongside a lower minimum investment of just £25 and the launch of a new app, will make saving with NS&I easier than ever. Furthermore, the annual subscription limit for Junior ISAs for 2019-20 will be uprated in line with CPI to £4,368. However, there was no change to the subscription amount for mainstream ISAs which remained at £20,000 for the third year running.

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