As the Chancellor of the Exchequer stepped up to deliver his third Budget speech it was heavily predicted that Pension Tax Relief was to be reduced to facilitate the extra £20.5bn funding, promised by the Prime Minister earlier in the year. Early into his speech, Mr Hammond stated that a few of his ‘star bunnies’ had escaped out of his hat slightly earlier than he would have hoped, further suggesting that Pension Tax Relief was up for change. What transpired in the following 72 minutes however, was somewhat unexpected.
Overall, pensions were largely left alone. The Lifetime Allowance – which is the limit on the value of pay-outs you can receive from your pensions without triggering additional tax charges – is to be increased a year earlier than expected to £1,055,000 for 19/20. Issues such as pension cold calling, exploring how easy the current regime enables investment into long term capital and boosting pensions for the self-employed were also touched upon. These such issues would all be dealt with in future public consultation papers.
In April, the Government had increased the personal allowance to £11,850 and the Higher Rate Threshold to £46,350 with the idea to increase them to £12,500 and £50,000 respectively by 2020. Philip Hammond announced that in a bid to end austerity he would not increase people’s tax bills and pledged to bring the plan to increase the personal allowance and Higher Rate Threshold up a year, with the increases coming into effect April 2019.
Other notable announcements were:
- £30bn package for England’s roads, including £420m for the repairs of potholes.
- Stamp Duty to be abolished for all first-time buyers of shared ownership property of up to £500,000.
- Focus a proportion of the £20.5bn NHS funding towards mental health with a 24-hour mental health hotline to be implemented.
- £1bn to the Ministry of Defence to increase cyber capability and submarine warfare capacity
- Treasury donation of £10m to the Armed Forces Covenant Fund Trust to mark the Centenary of the Armistice this year.
At present, the Annual Allowance remains at £40,000, the Tapered Annual Allowance remains at £150,000 and regime of Pension Tax Relief remains the same. However, with Brexit on the horizon and Mr Hammond threatening a full budget in April should the negotiations not go as planned, we could still see some changes to Pension Tax Relief in the foreseeable future so… watch this space.
Should you want to discuss making contributions into your pensions or any of the topics mentioned in the Budget, please contact your financial adviser.