In his Budget speech on 16th March 2016 George Osborne, the Chancellor of the Exchequer, announced his plans for the UK’s spending and taxation over the next year and beyond.
Here’s a run-down of the key changes from the Budget announcement.
£20,000 ISA allowance
The biggest piece of news for UK savers is that the ISA allowance will rise from £15,240 up to £20,000 in April 2017. It’s a great boost and will enhance savers’ ability to responsibly plan for their financial future.
The Lifetime ISA
A brand new type of ISA was also announced in the 2016 budget – the Lifetime ISA.
Those under the age of 40 will be able to apply for a Lifetime ISA and save up to £4,000 per year in it. The government will then pay a 25% bonus on top. So, if you save the full £4,000 in any year, the government bonus will be an additional £1,000. It can be taken as a cash ISA or stocks and shares ISA, and UK residents will have the option of either using the money to buy their first house, or keeping it saved or invested until the age of 60.
For the full details, read our blog on the Lifetime ISA.
The personal tax allowance will rise next year to £11,500, and the higher-rate tax threshold will rise from £42,385 to £45,000. Capital gains tax will also be cut to 10% for basic rate taxpayers and 20% for higher rate taxpayers – great news for those who invest.
The sugar tax
The Budget speech also signalled the introduction of a sugar tax which will be levied on companies producing sugar-laden fizzy drinks. The tax will be introduced in two years’ time and is hoped to raise more than £500m, which will be spent on primary school sports.
Fuel duty remains frozen for the sixth year running. Duty on beer, cider and spirits also remains unchanged. There will be a 2% increase in tax on cigarettes, rising to 3% for rolling tobacco.
Other changes included plans for longer school days in England, an increase in insurance premium tax and further tax breaks for the UK’s oil and gas sector.
Risk warning: As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. ISA rules apply. Tax rules may change in the future. Some of the Lifetime ISA rules are quite complicated and restrictions apply. If you’re unsure if a Lifetime ISA is the right choice for you, please seek independent financial advice. Tax treatment depends on your individual circumstances and may be subject to change in the future.