Budget 2016: Chancellor pulls ISA rabbits out of his hat16 March 2016
Budget 2016: Chancellor pulls ISA rabbits out of his hat
Jason Hollands, Managing Director at Tilney Bestinvest looks at how Osborne seeks to mend fences with middle class savers following today’s Budget.
“When it comes to changes to savings and investments, this Chancellor has a habit of surprising with major announcements whether that be the scrapping of Child Trust Funds, reforms to ISAs and of course his landmark "pensions freedoms".
“This Budget proved no different, with crowd pleasing rabbits being pulled out of the hat including a massive hike in the ISA allowance from April 2017 from £15,240 to £20,000, a new Lifetime ISA for the under 40s where up to £4000 can be saved a year and receive a 25% top up from the government, plus unexpected steep reductions in capital gains tax rates.
“Yet most financial advisers went into this Budget with low - even dark - expectations, the Chancellor having only recently decided to pull back from a full frontal assault on the long established system of tax relief on pension contributions. Many expected some other pincer movements against pensions, such as further cuts in the pension’s lifetime or annual allowances or hikes in capital gains tax.
“Instead, the move to super-charge ISAs looks like an attempt to mend fences with affluent savers, which is remarkable really when you consider only a very small proportion of investors are currently able to fund the £15,240 annual allowance as it is and bearing in mind, also, that from 6 April basic rate taxpayers and higher rate taxpayers will respectively be able to earn their first £1,000 and £500 of interest tax outside of ISAs tax free. With a couple being able to tuck away an astonishing £40k a year in ISAs, that means the vast majority of Britons should be able to ring-fence their savings and investments from the tax man.
“But as well as being a Chancellor who likes to surprise, we also know he is shrewd political tactician. The respite for pension reliefs may well turn out to be tactical withdrawal ahead of the EU referendum, so watch out for this issue to return at a later date.”
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The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested.
This article is not advice to invest or to use our services. If you are in doubt as to the suitability of an investment please contact one of our advisers.
The above article is based on our interpretation of the Budget 2016 and related legislation; it is not intended as advice, and the impact of any changes to tax rates or allowances will depend on your personal circumstances.
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Tilney Bestinvest is a leading investment and financial planning firm that builds on a heritage of more than 150 years. We look after more than £9 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.
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We have won numerous awards including Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.
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Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years. Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.
We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the YourMoney.com Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.
Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.