Financial Planners have been reacting to today’s Budget.

Read on for their analysis…

Natalie Wright Chartered Financial Planner at Mazars Financial Planning

With the allowance being cut from £5,000 to £2,000 from 6th April 2018, this is likely to affect individuals with share portfolios (or dividend producing assets) valued around £50,000 or more.

The current allowance has allowed individuals to hold portfolios of around £150,000 whilst generating tax free returns. Clearly the reduction in the allowance is likely to bring more individuals into the Self Assessment regime, possibly without them understanding what this means (particularly where they do not receive professional advice).

In real terms, the cut from £5,000 to £2,000 will cost basic-rate taxpayers £225, higher-rate taxpayers £975 and additional-rate taxpayers £1,143. 2017/18 presents an opportunity for individuals and couples to maximise tax free returns before the reduction takes place and to focus on maximising ISA and pension contributions

Keith Churchouse Chartered FCSI FPFS Chartered Financial Planner and director of Chapters Financial

Wow! That was sadly a rather dull Budget. Dull from the point of innovation, but I suppose good from the point of view that many of the main Financial Planning structures that we use and enjoy have remained unchanged - as far as I can see - unless the devil is in the detail (which it usually is). I am pleased that pensions have remained untouched.

It is good to see that the UK economy seems to be weathering the Brexit storm well, with increased growth forecasts, which we thought were the case, but none the less good to see confirmed.

The planning headlines are:

· The income tax personal allowance will rise to £11,500 gross in the new tax year.
· Dividend tax allowances of £5,000 tax free will fall to £2,000 from the start of the tax year April 2018.
· National Insurance Contributions (NICs) in Class 4 will increase for the self-employed by 1.0% from April 2018 and again in April 2019.

The dividend tax point is the key point, although the Chancellor did note that this is partially offset by the significant increase in the ISA allowance in this forthcoming year.

It is good to see that spending in both the NHS and Social Care is being increased, although we do query whether this goes far enough. Perhaps we will only know when next winter arrives will we really know.

In the evolution of online financial advice, it is good to see a lesser, but encouraging boost to R&D with a planned reduction in administrative burden. Possibly a greater incentive to innovate further.

Gemma Siddle FPFS, APP, CFPTM Chartered Financial Planner at Eldon Financial

Some of my highlights are:

• Reduction in tax-free dividend allowance for shareholders from £5,000 to £2,000 – this will have a significant impact on company owners who extract their profit via dividends. However, it will also bring a lot more people into the Self Assessment system as they will have to declare dividends above this allowance on a tax return. Introducing an allowance from nowhere one year then cutting it by 60% does not provide stability in taxation.
• Increase in Class 4 National Insurance – it is good to see this coming more into line with employee national insurance

• Lifetime ISAs – good to see no changes to these proposals although there is a still a shortage of providers who offer them from 6th April 2017

• Considering whether or not to make Maths compulsory until age 18 – I think this is a huge development for the good of financial planning as a whole. A lot of people struggle with personal finance at a young age through lack of understanding of maths concepts. All we need to do now is get more personal financial planning on the curriculum!

• Extending the school day – this could have a huge impact on families. Child care costs could be lowered for families and, if the Chancellor is to be believed, the children will benefit from the additional time in school. However, with a demographic of stressed teachers and difficulty hiring into the profession this will be a tough (and possibly costly) challenge. Especially in the north of England where there is to be an added focus on the performance of schools.

Angela Murfitt Chartered MCSI Chartered Financial Planner at Fairstone

The Chancellor has announced measures aimed at helping small business by reducing the impact of the business rates revaluation due to come into effect shortly. This will be welcomed by small business as will the confirmation that Corporation tax will reduce to 19% with effect from April 17 down to 17% in 2020 by business in general.

The government has indicated its clear intention to bring closer parity to the different employment regimes by announcing changes to NICs for the Self Employed choosing to stick with the previously announced abolition of Class 2 from 2018 but then announcing an increase to Class 4 NIC on profits from 2018 by 1 % then a further 1% in 2019. This increase in tax on profits will reduce the incomes of those operating this way as the flat rate NIC 2 is replaced by a percentage of profit based increase on Class 4.

At the same time, the Dividend tax free allowance introduced this tax year will be reduced from £5000 to £2000 from 2018. This will affect those employed via their own Limited companies as well as those who hold share portfolios outside of favourable tax wrappers like ISAs. A reduction in the allowance means less dividend can be taken tax free so more of the declared dividends will attract tax at one of the higher levels applicable to basic, higher or additional rate tax payers.

Against this background the chancellor has committed to raising the personal allowance to £12,500 during this parliament and the Higher Rate tax threshold to £50,000. It is projected that more than 29 million basic rate tax payers will be £1,000 better off than in 2010. Anything that puts more money in the pockets of the masses can only be good news increasing the disposable income available in household budgets.

The new NS&I bond announced in the last budget statement is confirmed to be available from April 2017 at a rate of 2.20% for savings up to £3,000. A small but welcome boost to the savings opportunities for older people. The increase in the ISA savings limit will also be going ahead from the new tax year opening up the opportunity to save up to £20,000 per annum in an Individual savings account (ISA) in a tax efficient environment.

As the tax regime gets more complicated it is abundantly clear that financial planning needs to be reviewed, pension funding considered to benefit from the tax reliefs still available there, and full use of tax breaks such as ISA allowances and Capital Gains tax allowances are used to their best effect to try and offset the impact of these tax hits.”

Chartered Financial Planner Nicola Watts APFS Chartered FCSI, director of Jane Smith Financial Planning in Olney

Although good to see that there has been little of the large scale changes to pensions that we have seen in previous years, it’s disappointing to see the possible reduction in the Money Purchase Annual Allowance announced in the Autumn Statement will now proceed. My one hope for the budget today was that this proposal would be scrapped or at least further time given towards consultation on the potential impact of the reduction from £10,000 to £4,000.

The reduction in the dividend tax allowance from £5,000 to £2,000 will also mean increased consideration needs to be made for planning on taxable portfolios. And for company directors who remunerate themselves by way of dividend, they may need to rethink their salary and dividend structures for maximum tax efficiency.

I wasn’t that impressed with the new NS&I bond, another carry over from the Autumn Statement. Although the rate of 2.2% is attractive in the current market, many of our clients just simply won’t bother. Some will argue that with the maximum investment of £3,000 they can’t be bothered with the faff of opening another account that will only give them an additional £36 of gross interest each year (assuming they could get 1% elsewhere). I’m afraid this is unlikely to get many excited!

Chartered Financial Planner Carl Lamb APFS, managing director of Almary Green in Norwich

Dividend allowance reduction from £5,000 to £2,000: This is a disappointment and will affect those who hold substantial shares. It seems odd to have introduced the allowance last year at £5,000 only to slash it to less than half just a year later. This allowance was an incentive to investors to put their money into businesses rather than cash investments and “UK plc” is looking less attractive now.

NICs for the Self-Employed: not a surprise that the Chancellor has moved his focus to the growing number of self-employed, but is likely to lead to calls for more benefits such as parental leave to become available to self-employed workers.

Reduction in the MPAA: Although this is as expected, there were those who hoped that the Chancellor would reconsider this measure. With Government wanting individuals to increasingly take control of their future retirement income, it would have been good to see a reversal of the trend to reduce both the Lifetime Allowance and the MPAA to give those who can save for retirement better options.