Key points of Budget were ‘changes we didn’t see’

While Rishi Sunak's Budget focused on the response to the coronavirus outbreak and the implications on both a health and finance basis, financial expert, Old Mill, has suggested the key points of the Budget were “the changes that we didn’t see.”

Old Mill chartered financial planner, Gavin Jones, said that other changes that could have an impact individual wealth management were overlooked.
“With a lot of talk before the Budget of a big reduction in pension tax relief for higher earners and following the two reports about Inheritance Tax (IHT) from the Office for Tax Simplification (OTS) in 2019, we still expect reform in these areas,” he commented.

“With a big increase in borrowing and the autumn Budget looming at some point, the focus will come back on tax receipts and these could be areas targeted. However, despite this, there were some changes to be aware of in terms of income, earnings, pensions and tax.
“The most significant change in terms of pensions is the Chancellor’s decision to increase the annual allowance taper threshold.”

The two annual allowance thresholds will be increased by £90,000 which means that from 2020-21 the “threshold income” will be £200,000 – meaning anyone with income below this level will not be affected – and the annual allowance will only begin to taper down for individuals with an “adjusted income” above £240,000.
“It’s of course a welcome move, but it remains a complex area while it will remove the impact on most people, more fundamental changes are needed for it to offer a real solution.

“My advice for now is for anyone who has opted out of a pension scheme or taken reduced pension contributions in exchange for increased salary, should revisit these calculations in light of this change.”
Sunak’s Budget also indicated the threshold for National Insurance Contributions is to be raised from £8,632 to £9,500 from April – taking it slightly closer to the Income Tax personal allowance, which Jones highlighted will make the average worker around £100 better off per year.

“While the personal allowance has not changed – it remains at £12,500 – you need to keep in mind that the level is reduced by £1 for each £2 over £100,000 until it reaches zero.

“Therefore, personal pension contributions and charitable gift aid donations remain an effective way of retaining the entitlement to the personal allowance, especially where income falls between £100,000 and £125,000.”

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