Following Rishi Sunak’s first budget on Wednesday 11th March 2020, Chris Hill of WBW Chartered Financial Planners has written a short summary of the main points for investors to consider:

  • National Insurance Threshold – The point at which employees and the self-employed will start paying National Insurance will increase to £9,500 from 6th April 2020. 
  • ISA allowance – will remain at £20,000 
  • Junior ISA and Child Trust Fund allowance – will increase from £4,368 to £9,000 
  • State pension – will increase by 3.9% from April 
  • Lifetime allowance for pensions (the maximum amount that can be saved without a tax penalty) – will be £1,073,100 from 6th April 2020. 
  • Annual allowance (the maximum amount that can be saved into pensions each year) – will remain at £40,000. 
  • Tapered annual allowance – the point at which the annual allowance is reduced for high earners will increase to £200,000 per tax year

There was also welcome clarity in two main areas:

  • Top slicing relief for investment bonds – Government will legislate in the Finance Act 2020 on how top slicing relief, which can reduce the tax paid on gains made on an investment bond, is calculated. Since the introduction of the personal savings allowance, the way in which this relief is calculated has been subject to dispute, culminating in a First-Tier Tribunal case last year. 
  • Pension tax relief – Government will review the application of tax relief for those earning around or below the personal allowance because some people are losing out on receiving tax relief due to the way that their pension scheme administers tax relief. Pension tax relief is given by deducting the contribution from pay before tax is deducted (known as the net pay system) or by deducting the contribution after the tax has been paid and the pension scheme claiming it back (known as the relief at source system). The relief at source system allows tax relief to be claimed even if no tax was paid on the income, increasing the amount that has been saved. For example, £1,000 saved into the pension would receive £250 tax relief meaning that £1,250 ends up in the pension. Whereas the net pay system assumes that tax relief has been given by taking the contribution before tax is deducted, meaning that £1,000 saved into the pension would still be £1,000.

Budget time is always a good point to review your finances and plan ahead for the new tax year. There may be opportunities for better managing the tax you pay on your investments and our team of Chartered Financial Planners are here to help. Contact them on 01626 202404 or email enquiries.cfp@wbw.co.uk to arrange a free initial consultation.