Member Article

Budget 2016 Reaction: "The devil's in the detail"

With the first major economic statement of 2016 now over, the finance experts at independent financial planning and investment management firm Gale and Phillipson have been giving their initial reaction.

Phil Morris, head of distribution at Gale and Phillipson, said: “On the face of it, the Chancellor’s Budget has brought up some positive news for both personal investors and small businesses in the UK.

“In particular, there is no doubt that the increase in the tax free personal allowance to £11,500 and the increase in the higher tax bracket threshold to £45,000 will benefit a great many people across the country. It goes without saying that allowing working people to earn more before paying tax is always a good thing and this announcement will see around 500,000 workers dropping out of the higher rate tax bracket.

“With regard to some of the other big headlines, however – specifically the reduction in Capital Gains Tax rates and the Government’s new Lifetime ISA – the devil will be in the detail.

“The shift in Capital Gains Tax might be welcome news for some, but in our experience, this is a relatively niche area with little impact in real terms, the main benefit being for larger clients with investments that cannot be wrapped in ISAs.

“That said, Buy To Let landlords will not benefit from the change as gains on residential property are specifically excluded. This, combined with the higher levels of stamp duty on second home and restriction of tax relief on mortgage costs against rental income, is further evidence that the Chancellor is keen to encourage Buy To Let landlords out of the housing market.

“The ISA changes are good for investors as it means they can put more of their savings in to cash to benefit from the higher tax free amount. With the limits moving up to £20k per person, alongside the personal savings allowance from April 2016, this is definitely a strong message for encouraging more people to save for the future.

“The only ‘new’ development here as far as we’re concerned is the introduction of the Lifetime ISA for the under 40s. On a superficial level at least, this is a welcome introduction to the savings market and it looks like this fits with the government’s aim to get more young people planning for the future.

“Again though, on closer inspection, we might question how far this will go to achieving that goal in practice. The £4,000 limit can hardly be seen as a substantial alternative to a pension pot, or deposit towards getting on the first rung of the housing ladder. In addition, the new ISA will carry the caveat of a hefty 5% charge on any withdrawal made to cover anything other than a ‘pension’ or house purchase.

“In short, it seems that unless the detailed analysis of the underlying content throws out an unexpected curve ball somewhere along the line, this won’t be the most earth shattering of budgets. Perhaps Mr Osborne’s designs on moving next door have caused him to play it safe? At least the tax reductions will leave more money in our pockets to pay for fizzy drinks!”

Gale and Phillipson is an independent financial planning and investment management firm, dating back to 1905. The firm was formed through the merger of two well-established firms: jonathanfry plc and Easby Gale and Phillipson in 2015.

The group provides comprehensive and focussed financial planning advice, discretionary investment management, advisory investment management, mortgage advice, corporate financial advice and the industry-leading cash management service: Dynamic Cash Management, to UK clients.

This was posted in Bdaily's Members' News section by Gale and Phillipson .