Budget review: Savings, rabbits and headwinds
We know by now to expect the unexpected from George Osborne at the Budget. Of course, many of the rumblings beforehand came to pass. As was predicted, the raid – or ‘reform’, the euphemism preferred by some - on pensions was put on the back burner. Fuel and beer duty were left alone too. GDP forecasts were lowered. All secondary state schools are to become academies. And the brunt of the £3.5bn in proposed cuts would fall on the public sector and local authorities.
Yet, true to form, the Chancellor pulled some rabbits from his red box too, with some assuaging sweeteners to headline an ostensibly gloomy speech. Here are the five things from Budget 2016 which will be the talk of the town over the next few days:
New ISA allowance
The individual ISA allowance’s steady rise since 2010 had been halted by a freeze of £15,240 for the 2016-17 financial year. However, Osborne confirmed that this figure will rise to a staggering £20,000 from the start of the 2017-18 tax year. This is a tremendous boost for savers and investors alike; not least those looking to subscribe to an Innovative Finance ISA in the future. Not only will this increase in the allowance give you the chance to shield more of your money from tax, but also to diversify a greater portion of your portfolio across the different ISA categories.
This one caught even the experts off guard. Osborne announced a new Lifetime ISA, which will be introduced from April 2017 for those between the ages of 18 and 40. And for every £4,000 saved within this ISA each year, Government will top you up with £1,000 (bonus valid until you turn 50). There is no maximum monthly contribution, and the entire annual ISA allowance of £20,000 can be allocated to it. You can then withdraw it all tax free after your 60th birthday; or beforehand if it is to purchase a first home (£450,000 or less), or if you are terminally ill.
However, it has already emerged that early withdrawal for any other reason will result in a loss of the Government bonus, interest on the bonus, and being charged a 5% penalty, so tread carefully here.
We already knew that the current personal allowance of £10,600 would be increasing to £11,000 for the next tax year, and the Chancellor trumpeted more good news by raising the allowance to £11,500 from April 2017 (and £12,500 by the end of the parliament). How it will affect plans to cut the deficit, only he will know. But for consumers, it’s certainly something to be pretty pleased about.
Threshold for higher rate of tax
The question regarding the increase in the threshold of higher-rate tax was less an ‘if’ than it was a ‘by how much’ going into the Budget speech. As it turned out, Osborne went for a fairly moderate step up to £45,000 from April 2017, with the current threshold of £42,385 already set to go up to £43,000 in three weeks. Nevertheless, it will be a boost for numerous members of the middle class.
Arguably the most controversial announcement of all, and one that played into the hands of Jeremy Corbyn and his rebuttal, was Osborne’s promise to lower corporation tax to 17% by 2020. In addition, cutting the headline rate for capital gains tax from 28% to 20% could have political implications in light of the hot subjects of inequality and tax avoidance.
However, the decision to lift small business rate relief from £6,000 to £15,000 should be applauded, and will surely enhance competition across many sectors for years to come.
Of course, the other big headline-grabber was that of a sugar tax on soft drinks. It doesn’t have a great deal to do with peer-to-peer lending, but certainly we as a platform struggle to see how anyone could poke a hole in this proposal, even if it does pass on a small cost to the consumer when it comes into place in two years’ time.
Overall, Osborne can probably reflect on a 62-minute job well done, and a delivery which ticked a lot of boxes. But the proof, as ever, will be in the pudding. Debt to GDP has been revised up to 82.6% for the next tax year, growth is expected to drop to 2% for 2016, the borrowing forecast has been scaled up to £55.5 billion (from £49.9bn) for 2016-17, and the Office for Budget Responsibility has stated that the economy is fundamentally less productive than previously predicted.
All this in the face of storm clouds like Brexit and an unstable global economy. Our economic future is far from being certain, and, needless to say, the Chancellor’s target of a £10bn surplus by 2020 looks a long, long way off from here. Let’s just hope that we’ll look back on Budget 2016 one day as a step in the right direction.
- Budget 2016: A big test for Osborne
- The EU referendum debate and us
- UK Budget deficit: Why all the fuss?
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There is barely a week to go until the conclusion of the 2017/18 financial year, which means that, as ISA season begins to hot up, time is running out to take advantage of your ISA allowance.
At the Summer Budget in 2015, George Osborne had multiple nuggets of good news for investors in peer-to-peer lending (P2P), most notably the announcement of the new Innovative Finance ISA (IFISA).
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.