What does the Budget mean for your finances?
Simon Bruce of Cavendish Medical thinks about the key topics senior consultants should consider now
Despite months of speculation, the Chancellor did not announce any new measures reducing tax relief on pension contributions for higher earners in his eighth Budget speech in March. The key point to remember at this stage is that measures already announced, including a reduction in the lifetime allowance for pension savings to £1 million, will go ahead. At the same time, the annual allowance will be reduced for those with income from all sources of more than £150K. This means that all senior consultants will need to know where they stand in order to avoid ongoing annual allowance charges. As ever, get your paperwork in order early and watch out for any changes to pensionable pay.
On the positive side, several welcome measures were announced to support investors and long-term savers. First, the standard ISA rate will be increased to £20,000 per year from April 2017. Plus, children of consultants under 40 will be able to save up to £4000 per year under a new ‘Lifetime ISA’, giving more options for families to plan their tax-free investments across different generations.
Every £4 saved will be matched by £1 from the government, up to the age of 50. The savings can be withdrawn tax-free if used towards a deposit on a first home worth up to £450,000 or if they remain in the account until after the holder’s 60th birthday. The money can be withdrawn at any other stage but the government bonus, and any interest or growth on this, will be lost. There is also a five per cent charge for doing so.
The Capital Gains Tax due on investment gains will be cut from 28 per cent to 20 per cent for higher rate tax payers and from 18 per cent to 10 per cent for basic rate tax payers from this April; however, in a further blow to buy-to-let landlords, the new reduced rates will not apply to second homes or buy-to-let properties where mortgage interest relief is also due to be phased out.
With the imminent increase in tax on dividends from shares, investment funds and private practice arranged through limited companies, it is key to make sure that any available allowances are being maximised whether these are your own or your partner’s.
Isn’t it time you checked your position?
Simon Bruce is Managing Director of Cavendish Medical – specialist financial planners for senior medical professionals in the NHS or private practice. For a second opinion on your finances, please contact us on 020 7636 7006. www.cavendishmedical.com
The content of this article is for information only and must not be considered as financial advice. Cavendish Medical always recommends that you seek independent financial advice before making any financial decisions.
Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The value of investments and the income from them can fluctuate and investors may get back less than the amount invested.