Following on from the market update we sent earlier this week, we provide you with the key points from this year’s Budget, the announcement regarding interest rates, and remind you about utilising your ISA allowance for the current tax year.
The Chancellor Rishi Sunak presented the first Budget of the new government on Wednesday 11 March. The key headlines were:
- A £90,000 increase to the tapered annual allowance thresholds could remove funding restrictions for many high earners
- Those with income over £300,000 could see their tapered annual allowance reduced to £4,000
- Clarity on the calculation of the top slicing relief for investment bonds
- Income tax rates bands and allowances remain unchanged
Interest rates cut
On 11 March the Bank of England slashed the UK base rate to 0.25 per cent in a bid to boost economic demand at a time when coronavirus is causing severe economic uncertainty.
It is also fair to say that whilst the rate reduction will not make a huge difference to savers, it may make a massive difference to borrowers.
Most major lenders either already have reduced, or plan to reduce their variable rates within the next couple of weeks and when the variable rate reduces, the other rates, such as fixed rates generally tend to follow.
With some lenders having 5 year fixed rates under 1.5% and 10 year fixed rates in the region of 2%, we believe these rates may also fall soon.
This is an ideal opportunity to review your mortgage arrangements.
We recommend contacting your adviser today on 02380 920 128 to discuss your circumstances and potentially find a better deal.
Don’t forget that the end of the tax year is not too far away now and your ISA allowance for the current tax year may not have been fully utilised.
It is important all our clients understand that the sooner you utilise all your ISA allowance the sooner those funds become more tax efficient.
1. If you don’t use it, you lose it – If you don’t use your ISA allowance in a given tax year, it’s gone.
2. Interest from ISAs doesn’t impact your personal savings allowance (PSA) – If you’re a basic-rate tax payer, you can earn up to £1,000 in interest a year tax-free. If you’re a higher-rate tax payer, that reduces to £500. The good news is that any interest earned within an ISA doesn’t count towards this allowance.
3. The tax-free allowance makes a big difference – an ISA protects you from Capital Gains Tax on the amount invested within the Wrapper
4. Sheltering your portfolio from Dividend Tax – Last year, the dividend tax allowance reduced from £5,000 to £2,000 a year. Even if your portfolio isn’t yet yielding £2,000 in dividends, you can protect yourself from future tax by ensuring those investments are held within an ISA tax wrapper now.
5. Don’t forget about the Junior ISA – you can also shelter up to £4,368 in a Junior ISA for 2019/2020 tax year and £9,000 in the 2020/2020 tax year. This is only accessible when the child reaches 18.
Take action today
If you want to utilse your ISA allowance for this and the next (2020-2021) tax year, contact your adviser as soon as possible to discuss your needs further.
Warning: Unlike Cash, the value of investments and any income from them can rise as well as fall so you could get back less than invested.
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