Budget Update

 

 

 

What you may have missed in the budget

 
Hiding away in the depths of the chancellors red briefcase, buried under his headline grabbing sugar tax, were some less well reported items that could have important consequences:
 

• Lifetime ISAs - From April 2017 those aged between 18 and 40 will be able to take out a Lifetime ISA into which they can put up to £4,000 a year, with the government contributing an extra £1 for every £4 saved up to the age of 50.  There are many good reasons for investing in lifetime ISAs, not least because it’s free money from the government and it can be withdrawn tax free at retirement. 
  However the fund can only be used to buy a first property or withdrawn after the age of 60 to fund retirement; If you want to use it for anything else you'll be hit with a 5% penalty.  If mortgage companies refuse to lend, or the money is required for another purpose, this could leave savers with a decision to leave the money in the ISA until they’re 60 or withdraw it early, lose the bonuses accrued and face a 5% penalty.

 

• Increased tax on wine – whilst the government has frozen duty on beer, cider and spirits there will be an inflationary rise on wine.

 

• Insurance will get more expensive – IPT (the tax on insurance premiums) will increase from 9.5% to 10%, with the money being allocated to pay for improved flood defences across the North of England.

 

• Capital Gains Tax will fall from April this year, from 18% to 10% for basic rate taxpayers, and 28% to 20% for higher rate taxpayers.  However gains made on residential properties will not be eligible for the lowered rates.  Essentially this has provided an 8% surcharge for property developers and some buy-to-let property investors.