This week was of course The Budget – a financial day of reckoning which has been with us for centuries. Some of the historic awards go to:
Best Budget Bitch - the rather large George Ward Hunt arrived at the Commons in 1869 and opened the Budget box to find that he had left his speech at home. Oops. At 21 stone, was the largest Chancellor on record. Disraeli had to reassure Queen Victoria that "he has the sagacity of the elephant as well as its form."
Best Budget Bore - think you have had a boring week? The longest Budget speech was four hours 45 minutes by Gladstone in 1853….zzzz
Best Budget Boozer - the Chancellor delivering the Budget is the only politician allowed to drink in the chamber. Winston was a brandy man. Gaitskell had orange juice and rum. Rishi had water….
This week, the magic money tree was given another shake and there will be relief for many that the pandemic support will continue for months to come. Relief too for home buyers as the stamp duty holiday on the first £500,000 is extended.
We all know that there is a whopping hole to fill as we digest the destruction of 2020. Corporation tax will rise to 25% from 2023. But don’t be fooled - it is not just big companies which will pay for this. It is us too.
“The Cold Never Bothered Me Anyway….”
Well, it’s about to get colder, baby. This week Rishi Sunak froze many personal tax allowances along with income tax thresholds. Freezing thresholds and allowances does not sound that dramatic. But millions of us will be affected by these moves.
It’s a bit like telling an 8 year old that you will only buy her Frozen tracksuits to wear for the next 5 years. She will shrug. What’evs, doesn’t sound too bad. But by the time you’re dropping her off at her first school disco aged 13, she will be furious. What feels OK now will not feel OK in 5 years.
Consider inheritance tax, which has been frozen since 2009. The really quite low £325,000 threshold would be nearer £450,000 had it risen in line with inflation. This has morphed from something designed to hit the wealthy, into a hated tax to hit many.
As for income tax, nearly 1 million more people are estimated to become higher-rate taxpayers over the next 5 years.
And we also saw the lifetime allowance for pensions frozen at £1.07 million until April 2026. If you end up with more than that, you get clobbered with punitive tax. Ha ha you laugh – a million quid in a pension!? Diddums. But let’s assume a 50-year-old is a canny investor. She has £450,000 in a pension today, pays in £300 a month and gets returns of 8% a year for the next 10 years. Bang. She hits that threshold at 60.
Doctors, senior teachers, middle managers who started a pension plan early – this will probably hit you.
Higher taxes and a review of allowances down the road feel inevitable so it is worth considering taking profits from shares, reviewing your pension or considering passing assets to heirs. (Hi Mum and Dad!! Kissy kissy missing youuuu xx ) Now could be a judicious time to seek financial advice. We have more exciting news on that front next week so stay tuned……#enigmatic.
A practical list of stuff to consider
That’s it for this week. Apologies to all parents of small people who now have that Frozen tune re-embedded in their brains. You can hum it maniacally as you dig out school uniform this weekend and wonder if it’s socially acceptable to send them in with trousers which barely cover their knees. Yup Monday morning at 830 here we come.