The ones to watch in 2018 – part 2
The start of the new year gives us all a chance to think about what we want to achieve. Of course some of this will depend on the economic situation in the world around us, along with changes to legislation affecting your pocket.
In this second part of our blog, we look ahead at a further three areas to provide some answers to the big financial questions affecting you.
Pensions came out of the Chancellor’s most recent budget relatively unscathed, despite some predicting that this is an area the government could look to shake up in an attempt to generate more taxes. As it stands, there is actually some good news for pension holders with a sizeable pot as for the first time since 2010, the total amount you can save into a pension is rising. From April, the lifetime allowance will be £1.03m, up £30,000 from last year.
The amount employees stand to receive from their employer as part of their pension scheme could be on the up. Since 2012 when auto enrolment began being phased in, the minimum prescribed rate for employers has been low – at only 1 percent. From April 2018, this will rise to 2 percent from companies. However, take home pay will also reduce as the minimum payable into the scheme by the employee will also rise, to 3 percent.
Against the predictions of many, 2017 saw solid performance across the equities market. Many economists are predicting 2018 will see an end to ‘straight line’ gains, with a somewhat more volatile path ahead. That said, with interest rates still so low, the equities market could still deliver better returns if a long-term approach is taken.
It should be noted that as of April 2018 the tax-free dividend allowance will fall from £5000 to just £2000. This is bad news for Directors taking dividends from companies and investors with substantial holdings outside tax-free Isa and pension wrappers. Income from shares above the tax-free amount are subject to tax at 7.5pc for basic-rate taxpayers, 32.5pc for higher-rate payers and 38.1pc for top-rate payers.
Inheritance Tax (IHT)
April 2018 will see the next stage of the “main residence nil-rate band’ allowance phase in, which will rise to £125,000 per person. Added to the existing IHT allowance, the total an individual is able to pass on without paying inheritance tax will be £450,000. There are certain restrictions – for example, the home must be a main residence and passed to direct descendants (children, stepchildren and grandchildren).
By April 2020, £1m will be able to passed on free of IHT.
Hopefully this quick run-down on the main financial ‘ones to watch’ has been useful to get you thinking what’s ahead for you and your money this year. For a confidential discussion about how you can better plan for your financial future, please contact us.