With the drama of the General Election now over, the world continues to turn and it now seems like business as usual (apart from the various leadership contests ongoing in several parties!)
I thought I would summarise what some of the key changes may be to our personal finances, based on what the Tories have stated over the last few months.
It’s usually the case that personal taxation rises after an Election, whichever party is in Government, but the Tories have pledged not to raise VAT, income tax or national insurance contributions, and actually intend to pass a law to this effect. They also intend to increase the threshold for paying the higher rate of income tax (40%) to £50,000 – it is currently £42,386 – but the timeframe for this change is not yet certain.
Moving onto Inheritance Tax (which is the tax payable on your estate after your death if it passes to anyone other than your spouse, when there is no tax to pay). The UK has a relatively low threshold compared to other countries, of £325,000 per person or £650,000 shared for a married couple.
Ever increasing numbers of families are crossing the threshold primarily as a result of rising house values, so the Tories have indicated they will increase each individual allowance by £175,000 in respect of the value of the family home. This effectively means a shared threshold for a married couple of £1 million if it includes the family home. This will certainly appeal to those affected, because the 40% tax rate on anything above the threshold can significantly reduce what’s available to leave for the next generation.
There may in future be further changes to ISAs, and the introduction of a tax-free Personal Savings Allowance.
Finally it’s worth mentioning that ALL the main parties before the election were talking about reducing the tax relief available on pensions contributions for higher rate tax payers. There are several different ways of doing this, and the Conservatives have not yet confirmed what, how, if or when. But if you ARE a higher rate taxpayer, you should consider making the most of the opportunity now to maximise your pension contribution – you can contribute 100% of your salary or £40,000, whichever is lower. So for every £100 of gross contribution, £40 is actually funded by HMRC, so it only costs you £60 – that’s a tax relief that’s worth taking !
Talk to your Financial Planner about making the most of this relief before it reduces. I have only touched on a few of the areas that are likely to see changes in future, so the best thing is to ensure you review your personal finances regularly with the help of your Financial Planner, to ensure you understand, and take advantage of, the elements that will impact you most positively
To receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning, please contact Amanda Redman on 07801 045587, email firstname.lastname@example.org or visit www.amandaredmanfp.co.uk