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30 October 2018

Autumn Budget: Beyond the headlines

James Rowbury, Investment Research Coordinator, reviews some of the major announcements in the Autumn Budget, and what they mean for investors and savers.
 
Philip Hammond’s latest budget update had a jauntier tone than previously. Announcing “the era of austerity is finally coming to an end”, he has loosened the purse strings for some of the UK’s most stretched public services, while pledging higher taxation on digital conglomerates.
 
Looking beneath Hammond’s headlines, we consider how the budget will affect you:
 
Personal Finance
•           In a surprise giveaway, Philip Hammond has announced the Conservative manifesto pledge on increased income tax thresholds will be moved forward a year to April 2019. The personal allowance threshold will be increased from £11,850 to £12,500, while the threshold for higher-rate taxpayers will rise from £46,350 to £50,000. However, the move will have little impact on low earners, there will be an additional £130 per annum for basic rate taxpayers and, for someone earning £50,000 and over, an additional £890 per year, including the personal allowance changes.
 
•           The annual ISA allowance will remain unchanged as we head into the new tax year, following successive years of generous increases, however, Junior ISAs will increase in line with inflation into 2019/20, resulting in a £108 increase to £4,368.
 
•           As expected, the lifetime allowance on pensions has been given a boost of £25,000 from £1.03m, allowing you to build your pension pot further without paying a tax charge. The increase, although minimal, is roughly in line with the current inflation rate. In addition, the government is now bringing forward regulations to ban pension related cold calls.
 
•           In 2017, the government announced a crackdown on individuals using personal service companies (PSCs) while engaging in public sector work. The news made significant headlines as a number of BBC presenters were investigated by HMRC for their non-compliance with off-payroll working rules. In a further move, the Treasury has now announced they will extend reforms to the private sector, which is expected to result in a tax increase for consultant workers and contractors alike. We await further detail, but the government expects to net a further £3bn in tax revenue from the move.
 
Stock Markets
•           Defence spending has been increased by £1bn in both 2018/19 and 2019/20, specifically earmarked for cyber security, marine warfare and the UK’s nuclear deterrent. The increase represents a piecemeal 2% increase on the current budget and will mean relatively little to defence companies. Nevertheless, the move marks a clear signal that security is back on the agenda.
 
•           Following suit with the EU and Singapore, the Chancellor announced a Digital Services Tax on the UK revenues of large online platforms. The tax will be 2% on profitable digital businesses with global sales in excess of £500m, and is expected to generate a further £400m per year. Nevertheless, the tax will be a temporary measure and is subject to move in-line with any OECD requirements.
 
•           Pub landlords can breathe a sigh of relief following a decision to freeze duty on beer and spirits, while also benefitting from the news that the government plans to lower the cost of wedding venues by removing the ‘red tape’ and making it easier to hold weddings in pubs, hotels and restaurants. The move may see leisure operators diversify their operations into this area, with their scale allowing them to provide quality at a lower fee.
 
•           In a more surprising announcement, UK infrastructure projects will no longer be procured using PFI, or PF2 contracts. Existing contracts will be serviced, as promised, and the government plans to open a centre of excellence to manage these. The infrastructure sector is one to watch as this develops, although many funds in this segment have already begun diversifying their investment away from such contracts.
 
•           Although expected, the government has introduced a much less severe Remote Gaming Duty increase of 21%. This should provide some relief to a sector that has been hit hard by recent rules limiting the stake allowance on fixed odds betting machines to £2.
 
Ends
 
You can follow us on Twitter www.twitter.com/redmaynebentley
 
Notes to Editors
Redmayne Bentley has a full range of services, from investment management services suitable for different life stages, through to traditional stockbroking, dealing with advice and tax efficient investments.
 
 
Autumn Budget: Beyond the headlines
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