Bid to encourage investors panned as gimmick by experts
MANY of us will still be digesting the finer points of last week’s Budget.
The take on its broad brush rather depends on whether you are a glass half-full or glass half-empty person.
Origen Financial Services stated: “Most working age taxpayers will see a reduced rate of tax as National Insurance Contribution rates fall, although this is largely offset by the fiscal drag of personal allowances and tax bands being frozen.
“The expectation that inflation will drop below two per cent is a positive sign, with the anticipation that this will lead to cuts in interest rates.”
Focusing in, it is worth shining a light on four aspects of the Chancellor’s statement – the UK ISA; Capital Gains Tax (CGT) on selling second properties; the pensions triple lock; and child benefit.
The UK ISA, a £5,000 bonus in addition to the existing ISA allowance, was announced in association with British Savings Bonds, the latter delivered through National Savings and Investments.
Chancellor Jeremy Hunt said he wanted to encourage more people to invest in UK assets.
However, some investment advisers panned it. Jason Hollands, Bestinvest managing director, said: “An increase in the core ISA allowance, which has been frozen at £20,000 since 2017/18, would have been far more preferable.”
Russ Mould, AJ Bell investment director, called it a gimmick. “In reality, people can already invest as much as they like in UK shares via a stocks and shares ISA.”
Higher rate taxpayers will get a CGT cut from 28% to 24% on the sale of second homes. The Government hopes this will make more properties available for buyers including those looking to get on the housing ladder for the first time.
And Mr Hunt moved to abolish holiday let tax breaks, claiming the system was “regularly abused”.
He maintained the current furnished holiday lettings regime meant it was more profitable for second homeowners to let out their properties to holidaymakers rather than long-term renters.
Alistair Handyside owner of Higher Wiscombe, a group of luxury holiday cottages in East Devon, said: ‘I’m very disappointed.
“It will alienate the owners of the 127,000 properties affected. Worse, it will damage the visitor economy. Fewer holiday lets mean fewer visitors to pubs and attractions.”
A boost for the elderly with a pledge that the State Pension will continue to increase by the Triple Lock mechanism, taking the weekly income for those eligible to £221.20 from April.
This equates to around £11,500 a year, which, if you were buying an escalating income via an annuity, would cost you around £245,000.
Nick Flynn, director of retirement income at Canada Life, commented: “The State Pension is an incredibly valuable benefit for those fortunate enough to receive the full amount.”
Meanwhile, parents will cheer changes to income thresholds for child benefit.
Child benefit is currently based on the highest earner in a household and is withdrawn at the rate of £1 for every £100 earnings they have over £50,000. This is achieved via a tax charge and means that families will not enjoy any child benefit if the high earner has income over £60,000. That now goes up to £80,000 from April, the threshold at which child benefit is withdrawn increasing from £50,000 to £60,000, and the rate of withdrawal £1 for every £200 of income.
Individual pension contributions can reduce income further, enabling couples to keep more of their child benefits. Investment group Abrdn noted: “There are plans to make the system fairer by administering the benefit on a household basis, rather than on the highest earner. The Government aims to introduce this by April 2026 following consultation.”