A Budget for hardworking families?

Rajiv Vadgama

Rajiv Vadgama

The Chancellor, Philip Hammond, delivered his third Budget today (October 29). 

I was expecting more but, in light of Brexit, it was rather restrained apart from investment measures. Here are a few highlights of the measures announced by Mr Hammond.

The Personal Allowance was £6,475 back in 2010 to 2011. The Conservatives increased this to £11,850 in 2018 to 2019, continuing their commitment to raise it to £12,500.

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They had pledged to increase it and the lower rate tax bracket to £12,500 and £50,000 respectively by 2020 to 2021.

Today, the Chancellor announced that he would bring these increases in one year earlier and that these increases will apply from April 6 2019.

The increase in the personal allowance will mean that a typical basic rate taxpayer will save £130 a year. A higher rate taxpayer (someone earning more than £50,000 a year) will benefit by £990.

The increase in the personal allowance will increase the number of taxpayers taken out of income tax since 2015 to 2016 to 1.74 million. Thereafter, the personal allowance will increase with the Consumer Price Index (CPI). 

There was speculation in relation to changes to pensions, such as a reduction in the annual allowance or a restriction to tax relief, the latter either by abolishing higher/additional rate tax relief or moving to a flat rate relief system.

Nothing was announced today, but in the detail the Lifetime Allowance for pension savings will increase in line with CPI for 2019 to 2020 to £1,055,000.

Another topical relief is Entrepreneurs’ Relief. This was mentioned by the Chancellor but he wants entrepreneurs to continue to work in the UK.

Therefore, to support longer term business investment the only change was the increase in the holding period from 12 months to 24 months from April 6 2019.

High streets and town centres received some further relief. The Government announced business rates reductions in the Budget 2016 which businesses are already benefiting from.

To assist further, they announced today that they will be cutting bills by one-third for retail properties with a rateable value below £51,000 for two years from April 2019. This will benefit 90% of retail properties.

In addition, for the longer term, to support a sustainable transformation of high streets, there will be a Future High Streets Fund, which includes a £675m investment, planning reform, a High Streets Task Force to support local leadership, and funding to strengthen community assets, including the restoration of historic buildings on high streets.

Rajiv Vadgama is tax partner at RSM