Budget 2018 – Cautious Hammond’s Handouts

Charles Calkin, partner and financial planning consultant

“The era of austerity is over” and “hard cash for the hard working British people” were the recurring motifs of this year’s budget. The Chancellor’s long list of giveaways came to a £30bn commitment by 2024, two thirds of which is going on fulfilling the NHS promises.

The Chancellor was quick to redistribute the gift from the Office of Budget Responsibility of a positive £11.6bn revision to national borrowing forecasts – like a big bag of multi-mix sweets handed out one at a time to all callers. But for all the talk (and there was about 71 minutes of it), Philip Hammond still seemed like he was holding something back – both treats and tricks.

The Chancellor talked a lot about investing a little in roads, railways and research and supporting High Street businesses. He spoke at some length about investing to get the Universal Credit regime right, but the big surprise was the commitment to increase the personal allowance to £12,500 and the higher rate tax threshold to £50,000 – not by April 2020 but by April 2019. So nothing this year, but good news for next.

There were some interesting things in there – like the digital tax, or the Amazon tax, as I suspect it will come to be known. But it is not going to raise that much – £400m will just about pay for the pothole repairs promised. Perhaps he was concerned about provoking a backlash from Trump as it is mainly American corporates who will pay for this. The investment in mental health will be welcome to millions. This is an area we are giving a lot of consideration to ourselves, working to ensure we support the mental wellbeing of our staff and improve their awareness of mental health issues in the workplace.

The biggest surprise was that so little was mentioned about raising taxes. Nothing was mentioned about CGT, pensions or ISAs. So it remains possible for most people to invest up to £40k a year into their pensions with all the current perks and limitations. Unfortunately, the lifetime allowance remains too – though the supporting papers indicate that that will rise in line with CPI to £1,055,000 by 2019/20. The lifetime allowance is going to sweep up a surprising number of people and is unnecessarily complex.

The Lifetime ISA was neither abandoned nor reformed, which may disappoint some.

The big takeaway of this budget was that this is a Chancellor who is leaving himself headroom to intervene in the event of a no-deal Brexit. He has nothing left in his bag to give away now, but if he needs to he knows where to find more sweets. Consider making the most of the current rules around pensions and CGT while you can.

Charles Calkin

30th October 2018

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