12 Nov Stay of execution? 2018 Budget
Now that we’ve all had some time to digest the latest budget; as with most budgets it is always interesting to look back at the pre-budget predictions to see which “favourites” fell by the wayside – at least for now.
Widely predicted were changes to tax relief on pensions. This has been a hot target for a while, with previous Chancellors concentrating on limiting your pension pot by reducing the Pension Lifetime Allowance which will, in fact, rise to £1,055,000 for tax year 2019/20. Mr Hammond resisted the temptation, much talked about, to limit the tax relief on pension contributions which costs the exchequer £Billions every year. He could, for example, have restricted tax relief to Basic Rate and done away with Higher Rate relief altogether.
However he might well be saving this for later, particularly if he is in need of a relatively easy win to balance the books post austerity. So it may well pay to maximise your contributions (up to £40,000 per year) take advantage, cash flow permitting, of the three year carry forward to make the most of the higher rate tax relief whilst it is available.
In addition to pension contributions, it might also be sensible to maximise dividends over the next couple of years. Whilst the advantage of dividends over salary has been eroded with the additional tax on dividends, there is still a tax preference overall for dividends. However there is still scope for increasing the tax on dividends (unlike the basic, higher and additional personal tax rates of 20%, 40% and 45% which are fixed until 2020). For example, rounding up the 7.5%, 32.5% and 38.1% to say 10%, 35% and 40%.