The headlines from the Autumn Budget this week focused on some rather grim economic forecasts, but in personal finance terms Philip Hammond’s speech was defined as much by what it didn’t contain as by the actual policy announcements.

There had been some speculation in financial quarters that, given the parlous state of the nation’s finances, the Chancellor would take a further swipe at pension taxation – perhaps restricting income tax relief on contributions to the Basic Rate, or further reducing the annual and lifetime allowances – as this was arguably less high profile than other potential tax raising measures. Fortunately no such changes were forthcoming, although there is still a sense that, once other more pressing issues have been addressed, the current rules will be re-visited.

A second pre-Budget rumour was that the level of revenue at which small businesses start to pay VAT would be reduced to £20,000, down from the current £85,000. In the end, this issue was ducked in the time-honoured way: by announcing a review.

Inheritance tax relief on business assets was also not mentioned, despite warnings from some commentators that it might be targeted.

In other areas of potential interest to our clients there were very few changes of note, with most allowances and reliefs moving up by 3%, in line with inflation, or being held at current values.

Some of the main changes announced, or confirmed, in the Budget are summarised below.

Income & Capital Taxation

The personal allowance will increase to £11,850 (from £11,500) and the higher rate threshold will rise to £46,350 (from £45,000) for 2018/19. The government restated its commitment to raising these to £12,500 and £50,000, respectively, by 2020.

The annual capital gains exemption for individuals will rise to £11,700 (from £11,300) for 2018/19.

The dividend allowance will be cut to £2,000 for 2018/19, impacting many small and medium sized business owners who take their profits as a dividend. Employer pension contributions will become an even more attractive way of extracting profits from a business. 


The lifetime allowance for pensions will rise to £1.03m for 2018/19. This is the first of the previously announced annual inflationary rises.

There were no changes to the annual allowance rules, to tax relief, or to the pension commencement lump sum (tax-free cash).

Residential Property

The most eye-catching announcement was the immediate removal of stamp duty (SDLT) for first-time buyers on purchases of up to £300,000, with a reduction in rates for properties costing between £300,000 and £500,000. Above £500,000 the calculation of SDLT will revert to current rules on the entire purchase price.

The windfall gain of up to £5,000 will no doubt be welcomed by younger voters, struggling to purchase their first home, although an increase in prices at the lower end of the market, which could well result, might mean that the benefit actually accrues to existing property owners.

Separately, the government will call for evidence to establish how rent-a-room relief is used and to ensure that it is better targeted at longer-term lettings – a clear sign that the AirBnB market is under review.

Tax-efficient Savings

The ISA annual subscription limit for 2018/19 will remain unchanged at £20,000 (although the limit was raised substantially last year) and the lifetime ISA (LISA) annual subscription limit will stay at £4,000. The annual subscription limit for junior ISAs (JISAs) and child trust funds (CTFs) for 2018/19 will rise to £4,260.

The 0% band for the starting rate for savings income will be retained at its current value of £5,000 for 2018/19.

New legislation will ensure that Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EISs) and Seed Enterprise Investment Schemes (SEISs) are targeted at growth companies, where there is a real risk to the capital being invested, and will exclude investments in arrangements intended to provide capital preservation.

The detailed new rules have yet to be published, however they are likely to require a fairly fundamental change to certain companies’ business models; they will also act as a reminder to investors that, more than ever, past performance is no guarantee of future returns.

A related announcement, of interest only to wealthier investors, is that the maximum an individual may invest into an EIS each year will double to £2 million, where an amount of over £1 million is invested in one or more knowledge-intensive companies.

Inheritance Tax

The nil rate band will remain at £325,000 until April 2021 and the residence nil rate band will increase from £100,000 to £125,000 for estates valued below £2m. In total that will mean that, from April, most couples can leave assets up to £900,000 to the future generation free of tax.

For further information on these and other policy initiatives announced in the Budget, please contact Ian Thomas or Louise Taylor on Tel. 01803 864 092.

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