In any election year, the Chancellor comes under pressure to make announcements that will boost their party in the opinion polls.
Before today’s Budget, Jeremy Hunt was open about his desire to cut taxes, but also that the flatlining economy and his own fiscal rules didn’t leave him much room to manoeuvre.
So, do the policies announced in the Autumn Statement amount to a Budget bonus for advisors and their clients?
Taxes
The most widely trailed of today’s announcements was a 2% cut to National Insurance (NI) for employed people, which falls from 10% to 8% on earnings from £12,576 to £50,268.
The Chancellor said that would be worth £450 a year to the average employed person and £750 to higher rate taxpayers.
He also announced a 2% Income Tax cut for the self-employed, in a move he said was worth £350 to the average self-employed person.
The move comes after NI rates were cut by 2% for employed people and 1% for the self-employed barely three months ago.
But there was no action on Income Tax or Inheritance Tax.
Nick Henshaw, Head of Intermediary Distribution at Wesleyan, said: “This will put more money back into clients’ pockets, helping them meet their day-to-day outgoings, but also to save and invest.
“However, the fact that this reduction only applies to employee contributions will keep the pressure on employers, including financial advisors, which are still facing rising operating costs across the board. We would have liked to see some relief extended to them too.”
Savings and investments
The Chancellor also announced an expansion of Individual Savings Accounts (ISAs), which are designed to encourage more people to save and invest without paying any tax on the profits.
A new ‘British ISA’ will provide an extra £5,000 tax-free allowance for UK investments – on top of the existing £20,000 allowance.
Quite how this will work in practice remains to be seen, but it comes after a relaxation of ISA rules in November which gave the flexibility to open accounts with multiple ISA providers and make limited transfers between ISAs.
Our research found that would encourage almost a third of UK adults to invest more money into ISAs.
Nick Henshaw said: “As usual, the devil will be in the detail of today’s Budget.
“However, anything that can help make ISAs an even more attractive option for saving and investing is to be welcomed.
“A ‘British ISA’ will effectively increase the ISA allowance by £5,000 and builds on the ISA reforms already planned for April at a time when so many other tax allowances remain frozen.
“We will eagerly await more information on how it will be administered.”
For anyone lucky enough to own multiple properties, the higher rate of Capital Gains Tax for residential property disposals will be cut from 28% to 24%.
The lower rate will remain at 18% for any gains within the basic rate band and Private Residence Relief will continue to apply.