How the Budget might affect you

November 23, 2017 - John Woolhouse

It’s one the biggest events of the year that affects your finances, so what did Phillip Hammond, Chancellor of the Exchequer say in this week’s Budget that may affect you?

Here’s a few thoughts from the Managing Director of Furnley House, Stefan Fura.

There were a few things announced that I believe will impact our clients and their families.

Stamp Duty

The first major headline was the change to stamp duty, with the announcement that first time buyers will not have to pay any on purchases up to £300,000.

To help with buyers based in the south-east and other expensive areas, Chancellor Philip Hammond announced that properties valued up to 500,000 will still have no stamp duty payable on the first £300,000. He went on to say that this will result in 95% of first-time buyers seeing stamp duty cut, with 80% paying no stamp duty at all.

The maximum possible saving from this will be £5,000.

Research from Savills estimates that the stamp duty bill for first time buyers is approximately £2,700. AJ Bell’s current research indicates that in the north of England stamp duty charge is on average £1182. This demonstrates a large discrepancy in property prices across the UK. For us a as business, with 3 offices around the UK, we expect to see the regional variances.

For buyers that are paying more for their property, the Stamp Duty saving will add value however, the larger the purchase price, the larger the deposit required and this still represents the biggest challenge facing first time buyers. At Furnley House, we believe helping our clients to support their loved ones by embracing inter-generational wealth planning is a key ingredient in helping the next generation effectively join the property ladder.

If anybody is considering buying at this moment in time, stamp duty relief is unlikely to mean that now you’re able to buy if you weren’t able to previously; in real terms, it is more likely to mean you’ve got a little boost with moving into the property – for furniture, legal fees and getting the house into the home you’d like.

Enterprise Investment Schemes

The other news that affect our clients from this budget is a change to enterprise investment schemes.

Enterprise investment schemes or EIS investments currently attract better tax relief on monies invested with the aim to encourage more investments into growing businesses that benefit the UK economy.

Currently, the maximum annual limit is £1 million and this is being doubled for investments into companies that the Chancellor feels are particularly innovative.

Furnley House work with clients that invest in both EIS investments and venture capital trusts. They are tax efficient investments with large potential investment returns available for investors, however these investments remain only applicable to experienced investors that fully understand the risks involved investing in such small companies.   For a sophisticated and experienced investor, the EIS investments do represent a very attractive, tax efficient way of investing in potential future businesses that whilst benefiting the economy, also offer substantial growth returns above more mainstream investments.

Pension Tax Relief

Another key observation arising from the budget is around the much-rumoured area of pension tax relief that failed to materialise. We continue to be cautious around the future outlook around pension tax relief particularly for higher earners paying the higher tax rate and we’ll continue to watch this closely.

The Economy

Other news on an economic front is as expected; the office of budget responsibility has reduced the economic forecast of growth down to 1.5% this year from its previous estimate of 2% made in March.

It estimates that growth will continue to drop to 1.3 % by 2020 Rising to 1.5 % beyond that. What that means for investors is that the UK market is slowing down. As such, we’re looking at our client’s investments.

We’ve already made re-positions in our latest quarterly investment committee.

The growth forecasts have been widely expected and we’re now seeing the need to diversify investments into other areas with more attractive growth potential.

To summarise

If you’re currently considering purchasing your first property, I’m sure you’ll be very pleased with today’s news.

For the majority of people, it’s business as usual. A small Increase to the tax-free allowance was announced. A small increase to the higher rate allowance was announced and these are certainly welcome. However, for many individuals with higher rate tax issues, it still doesn’t offset those clients that receive dividends that were impacted by last year’s changes to dividend rules.

Get in touch

We’re happy to talk about any of these areas with clients in more detail. Please don’t hesitate to get in touch or call your adviser directly.