Autumn Budget Statement – October 2018

When Theresa May announced the NHS 70th Birthday bonus earlier this year, it was clear that she was putting pressure on Philip Hammond to find some cash from somewhere. With a further statement at the Tory Conference that austerity had ended, so the pressure increased as she passed the ‘baton’ to her Chancellor.

With the baton firmly in his hand, Mr Hammond promptly produced the sort of ‘giveaway’ Budget not seen for some time, which includes the required extra cash for the NHS along with extra funds for Defence, Mental Health, Universal Credit and even some money for Potholes.

Even his ‘rabbit out of the hat’ lacked an element of surprise with the final giveaway being an increase in Personal Allowances, which was a Manifesto promise simply pulled forward a year from April 2020 to April 2019.

Yet it is quite clear that all of this spending requires a good Brexit deal, along with good UK growth. Without either, we could well be seeing Mr Hammond on his feet again post-Brexit with a rather more sombre Budget message.

It seems the baton has been well and truly passed back to Mrs May at Number 10.

In all of this to-ing and fro-ing, changes affecting savers and investors were broadly and remarkably untouched, which very much sits in the ‘no news is good news’ camp. After far too much tinkering with rates and allowances, a Budget such as this does allow us to plan more easily when the goalposts remain firmly in place.

Full details of what Personal Finance changes were made (or not as the case may be) are set out below:

Autumn Budget 2018:​
Key Points for Savers and Investors

Income tax

  • Personal Allowance will be increased to £12,500 on 6 April 2019 for the 2019-2020 tax year.
  • The threshold above which higher earners start paying 40% tax is being increased to £50,000.

These allowances will remain the same for 2020/21 and then increase in line with Consumer Price Index (CPI) changes.

Pension changes

Standard Lifetime Allowance

  • The standard Lifetime Allowance for pensions will increase in line with the rise in the Consumer Prices Index (CPI) for 2019/20 to £1,055,000 as previously announced.

Annual Allowance

  • There are no changes to pension Annual Allowances (AA). The standard AA remains at £40,000 and there are no changes to the high income AA taper rules.

Individual Savings Account (ISA)

  • The ISA annual subscription limit for 2019/20 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2019/20 will be increased in line with CPI to £4,368.

Capital Gains Tax

  • The capital gains tax allowance will increase by £300 to £12,000 from April 2019.

Inheritance Tax

Inheritance tax rates and exemptions

  • The IHT Nil Rate Band will remain frozen at £325,000 until 2021/2022 as previously announced.

Residence Nil Rate Band (RNRB)

  • The Residence Nil Rate Band will rise to £150,000 from April 2019 as previously announced.

​General Tax

Simplifying Trust Taxation Consultation

  • This Budget confirmed there will be a consultation on the taxation of trusts to make their taxation simple, fairer and more transparent.

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Principle or Profit - do you have to make a Choice?

As society as a whole becomes more environmentally aware as well as being more informed, this social responsibility is becoming more prominent in Financial Services. Bank accounts and mortgages can both be set up with so-called ‘ethical’ companies, but what about the choices for investing money. It is here that the impact can be higher, so is there a price to pay in terms of performance? Can a company be ‘green’ without being “in the red”?

Ethical investing has been with us for some time. The idea originated in the US and became very popular in the 1970s when the Vietnam War led to some investors questioning what their money was funding. Ethical investing formally arrived in the UK in 1983, when a firm called Friends Provident - a life insurance firm founded by Quakers - set up the first so-called 'ethical fund' in the UK, with the investment criteria determined by a separate committee. 

This led to the launch of a range of Stewardship investments a year later, most of which are still running, having been rebranded under the F&C Investment banner. Since those halcyon days, a large number of firms have entered the market including major names like Henderson, Jupiter, Legal & General and Standard Life. Ethical investing is now big business. 

The concept does make sense. Apart from the obvious social responsibility angle, companies that make a positive contribution to the world and its surroundings do tend to sit well with regulators and companies, thereby avoiding fines and boycotts of their products which, in turn, can have a bad effect on the share price. Environmentally aware firms should, therefore, have better long-term prospects. 

Where it becomes more complicated is how we manage the term ‘ethical’. What is green for one person may not be for another. Let’s take an example: most people would agree that investing in a company that produces Arms and Weapons is not acceptable in an Ethical Portfolio. However, what about firms that trade with that company. They don’t make the guns, but they do supply the parts that make the guns. Are they acceptable in an Ethical Portfolio? Suddenly the water is muddied somewhat and we now feel a little uncomfortable with investing in that second company. 

But, what happens if we look more closely at the parts company, and find that it has an excellent environmental and staff welfare record. Do they now become ‘green’ again? And is that ‘green’ enough? Ethical criteria such as this will always be open to interpretation and manipulation, which poses the question: “How ethical is ethical?”

This is why it is easier to invest through a managed portfolio, which will have a stated ethical policy, making your decision easier to manage. If you invest directly in shares, you will have to decide which ethical values are the most important to you. 

We can see there is an increasing appetite for ethical propositions, which is why County have asked one of our investment partners, Brooks Macdonald, to come up with a suitable ethical proposition. This will be available shortly and we will also be discussing this topic in more detail at our Annual Seminar taking place at 2.00pm on the 29 November 2018. If you have not yet put the date in the diary, I would urge you to do so.

If you have any questions concerning any of these matters, please do not hesitate to contact us and we would be very happy to assist.

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