UK Budget 2018 and It’s Effect on Pensions & ROPS
There was almost no mention of pensions in the UK Budget 2018. Lifetime allowance will increase with inflation, but no mention of ROPS or QROPS.
There was no mention of Recognised Overseas Pension Schemes (ROPS, formerly known as QROPS), although the market is much smaller since they introduced more stringent QROPS rules in 2017 in the last budget.
Hammond obviously decided to leave pensions alone for at least another year.
Lifetime Allowance 2019
Lifetime allowance for pensions – The lifetime allowance for pension savings will increase in line with CPI (inflation) for 2019-20, rising to £1,055,000.
Starting rate for savings – The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2019-20.
Individual Savings Account (ISA) annual subscription limits – The adult ISA annual subscription limit for 2019-20 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs for 2019-20 will be uprated in line with CPI to £4,368.
UK Income Tax Rates 2019
Personal Allowance will increase to £12,500 and the higher rate threshold to £50,000 in April 2019, a year earlier than planned, cutting taxes for 32 million people.
UK Income Tax Rates and Bands 2019/20
|Band||Taxable Income 2018/19||New Taxable Income 2019/20||Tax rate|
|Personal Allowance||Up to £11,850||Up to £12,500||0%|
|Basic rate||£11,851 to £46,350||£11,851 to £50,000||20%|
|Higher rate||£46,351 to £150,000||£50,000 to £150,000||40%|
|Additional rate||over £150,000||over £150,000||45%|
Corporation tax is set at 19% – the lowest in the G20 – and it will fall further to 17% in 2020 after Brexit.
UK Budget 2018 Key Points
- Austerity to finish with NHS receiving extra cash, boosted from 5.9 to 6.7 billion GBP
- 1.7 billion GBP to make Universal Credit more generous – these allowances will increase by £1,000 from April 2019. This means that 2.4 million households will keep an extra £630 of their income each year
- New 2% tax on tech giants like Amazon & Google
- Fuel duty and duty rates for beer, cider and spirits will be frozen
- Fuel duty will be frozen for a ninth successive year saving the average driver a cumulative £1,000 by April 2020, compared with what they would have paid under the pre-2010 fuel duty escalator
- £400m extra for schools in this financial year. This will average £10,000 per primary school and £50,000 per secondary school. However, education & industry seems to be getting the biggest cuts over the next two years with the budget for education to fall by 20%
- Growth to remain low at around 1.5% p.a. for at least the next five years
- Increase in the National Productivity Investment Fund (NPIF) from £31 billion to £37 billion, and delivering the largest ever strategic roads investment package worth £28.8 billion from 2020-25
- However, The Budget announced the largest ever roads investment package, along with an additional £770 million to improve transport infrastructure in cities, and the next steps in the rollout of full fibre broadband nationwide.
- Additional £500 million to government departments for Brexit, bringing the government’s investment in EU exit preparations to over £4.2 billion since 2016. Hammond may also upscale the Brexit stimulus package as required
- £500m more for the housing infrastructure fund, which will unlock 650,000 homes. The fund now stands at £5.5bn
- The government will impose a new tax on the manufacture and import of plastic packaging that contains less than 30% of recycled plastic by 2020
Where Do Our Taxes Go?
The Digital Services Business Tax
The Digital Services Tax (DST) – from April 2020, the government will introduce a new 2% tax on the revenues of certain digital businesses to ensure that the amount of tax paid in the UK is reflective of the value they derive from their UK users. The tax will:
- apply to revenues generated from the provision of the following business activities: search engines, social media platforms and online marketplaces
- apply to revenues from those activities that are linked to the participation of UK users, subject to a £25 million per annum allowance
- only apply to groups that generate global revenues from in-scope business activities in excess of £500 million per annum
- include a safe harbour provision that exempts loss-makers and reduces the effective rate of tax on businesses with very low profit margins
UK Property Taxes
Stamp Duty Land Tax (SDLT) and first-time buyers relief – The government will extend first-time buyers relief in England and Northern Ireland so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property. This change will apply to relevant transactions with an effective date on or after 29 October 2018, and will also be backdated to 22 November 2017 so that those eligible who have not previously claimed first-time buyers relief will be able to amend their return to claim a refund.
Consultation on SDLT charge for non-residents – The government will publish a consultation in January 2019 on a SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.
Capital Gains Tax – To better target private residence relief at owner occupiers, from April 2020 the government will reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. The final period exemption will also be reduced from 18 months to 9 months. The government will consult on these changes. There will be no changes to the 36 months final period exemption available to disabled people or those in a care home.
You can read the full UK budget 2018 here.UK Budget 2018, Pensions & QROPS by Richard Malpass