What does George Osborne’s 10th Budget mean for you?

As ever, the Budget was combination of tax cuts and spending cuts – all designed to balance the books by 2020.


Overall ISA contribution limits are to increase to £20,000 from 2017/18.

There will be 4 possible components of this – Cash ISA and Stocks and Shares ISA, the Innovative Finance (IF ISA) designed for those wishing to invest in Peer to Peer lending and similar markets, and the new Lifetime ISA (LISA).


This new ISA will be available from April 2017 to those aged under 40.  The maximum contribution is £4,000 per annum, which is part of the overall £20,000 allowance.  At the end of each tax year, the Government will add a bonus of 25% of the contributions made in the year prior to age 50.

The arrangement is designed not to be accessed until age 60, other than for the purchase of a first home (like the Help to Buy ISA).  Withdrawal prior to age 60 will otherwise result in the loss of the Government bonuses (as well as interest/growth on them), and a 5% charge.

This will be a good opportunity for those clients affected by the reduced annual allowance or Lifetime Allowance issues to make additional savings for their retirement.

It is of course also open to non working spouses.

Savings Income

Following the changes announced previously that all interest from deposits will be paid gross with effect from April 2016, legislation will be introduced to make similar provision for interest payments from OEICs, authorised unit trusts, investment trusts and peer-to-peer loans.


Tinkering around the edges only

Despite amendments to some salary sacrifice plans for employee benefits, pensions were specifically excluded – so it’s here to stay – for now at least.


Income Tax

Personal allowance from 6 April 2016 will be £11,000 as previously announced.  This will increase to £11,500 from 6 April 2017.

Higher rate tax will be payable from £43,000 in 2016/17 rising to £45,000 in 2017/18.

Capital Gains Tax

One of the surprise announcements was the cut in the rate at which Capital Gains Tax (CGT) is payable – with immediate effect, gains falling within the basic rate band will be taxed at 10%, with gains in excess of this band being taxed at 20%, a reduction from 18% and 28% respectively.

Trustees and Executors will pay at 20%.

These rates will not apply to sales of residential property that are subject to CGT.  Rather the old rates will be retained.

If you are thinking of realising capital in the very near future, it may be worth holding off to the new tax year – not only a new annual exemption, but a lower rate of tax on any taxable gains.

An interesting move is the extension of Entrepreneur’s Relief to external longer term investors in unlisted trading companies.  For investors who acquire newly issued shares on or after 17 March 2016, as long as they are held for a minimum of 3 years from 6 April 2016, disposals will be taxed at 10% subject to a separate lifetime limit of £10m.


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