It is always an interesting time when the Chancellor of the Exchequer rises on Budget day, as we wonder what the speech will hold for us mere mortals. Often, the Devil is in the detail.  In this recent Budget, it seems that there is not a great deal of Devil in comparison with previous years. Beelzebub, it seems, is lurking in some of the other recent announcements, but more of that later.

You will probably be aware of the major points of this most recent speech: the increase of the basic rate personal Income Tax allowance to £11,500 from April 2017; and the higher rate threshold to £45,000. The maintaining of current Excise Duty levels on Beer, Cider, and Whisky (but no such generosity to wine drinkers) and no change to the rate on road fuels, will not be news to most of you. The tax on cigarettes will be increased, well in excess of inflation, as has become the norm. Insurance Premium Tax rises from 9.5% (to which it rose only last November) to 10%, the extra supposedly to raise extra funds for flood defences.

The more interesting points start to come now. The Chancellor announced the introduction of a new ‘Lifetime ISA’ to promote long-term savings, for those under 40 years of age, from April 2017. The product will offer a 25% bonus from the Government on contributions up to £4,000 per year. Payments will be made from taxed income and will equate to the basic rate tax relief that is currently available on pension contributions. The proceeds can be used towards the purchase of a first residential property valued at up to £450,000; and from age 60, used to supplement income (watch this space to see what the future holds for UK pension planning). Any non-qualifying withdrawals will be subject to a 5% charge. The contributions will count as part of a new £20,000 overall ISA limit, but it is not clear yet whether the bonus will also be considered to be part of the allowance, or whether it will be in addition. Any funds that are currently held in a Help to Buy ISA will be able to be transferred in, in addition to the limit – and benefit from the bonus – during the first year of the scheme. After that they would count as part of the annual allowance.

Capital Gains Tax rates will reduce to 20% for ‘higher’ and ‘additional’ rate taxpayers (from 28%) and 10% for other taxpayers for gains over £11,100. However, this will not apply to residential property transactions.

The annual threshold for Business Rate Relief is being doubled to £12,000 which should be of some help to a number of small businesses.

Now to the new tax allowances. £1,000 allowances for income from property and low-level trading. Blessed are the cheese / jam / crocheted teddy makers (and sellers) together with the driveway or loft space renters, for they will be paying less tax! On this subject, the Personal Savings Allowance (albeit first announced in last year’s Budget) comes into force in April, meaning that the first £1000 of income on savings will be free of tax for basic rate taxpayers, and the first £500 for higher rate payers. There is no benefit for ‘additional’ ratepayers. Interest payments from banks, building societies and National Savings will be paid gross, rather than net of a tax deduction.

Things to look out for in years to come: the Government has announced a review of ‘Salary Sacrifice’ arrangement where employees can exchange salary for tax-preferential benefits. There will be changes to the National Insurance contributions on ‘Termination Payments’ (redundancy etc.) and for the self-employed: Class 2 NI is to be abolished and, probably, merged with Class 4.

“How is the notoriously philanthropic Chancellor able to afford such beneficence?” I hear you say. Well, we shall see, but the recently announced (and even more recently protested about) reductions in the Social Security budget and particularly in PIP (since abandoned) and ESA may help replenish the coffers, as will the increase in NHS Dental charges in April (and again in April 2017) and the proposed Sugar Tax. The tax windfall from ‘Pensions Freedom’ could well continue. Many commentators have suggested, however, that the current targets are impossible, and that there was more politics than economics. But we shall see what we shall see, when we see it!

I’ll be back, when it’s a bit warmer, in ‘Spring Proper’. Figuratively speaking, see you then.

David Foot