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Axing stamp duty does not solve lack of savings in UK

Some no doubt popular moves from Chancellor Philip Hammond in this week’s Budget, including a crackdown on those companies that avoid paying tax in the UK and focusing on making the country a world leader in the technology revolution.

Aside from the new railcard for those lucky enough to be aged 26 to 30, the big news for the younger generation is the scrapping of stamp duty for first-time buyers on properties up to £300,000 and no stamp duty on the first £300,000 of properties worth up to £500,000.

This will mean a saving of £5,000 on a £300,000 property, which I am sure will be welcomed. Indeed, I could not access my usual online stamp duty calculator once the change had been announced, suggesting a lot of interest already.

However, concerns have been mooted this could lead to an increase in prices in these property price bands, which will not help any buyer, first time or not.

What the announcement has not done is address the issue of actually getting to a position to be able to afford the purchase in the first place; the tricky matter of saving for the deposit and having an income lenders will lend against (think of those working in the gig economy, for example) in a climate where the Office for Budget Responsibility has forecast a fall in GDP growth predictions against a background of inflation.

For instance, no mention was made of increasing the Lifetime Isa allowance from its current limit of £4,000, nor raising the associated Government bonus. In fact, unless you are planning to invest in EISs and take advantage of the announced doubling of limits for knowledge-intensive companies, there was little or no “positive” help for savers and investors. For example, no confirmation of the new Isa allowances for April 2018 was in the main speech, only the detail that followed.

The current savings and dividend allowances have been retained and no changes have been made to the inheritance tax regime, which is often seen as easy pickings for a government wanting to increase its tax take. And the tax relief on pension contributions and level of contributions remains unaltered again, which is great news, especially following the somewhat inevitable pre-Budget rumours it will be attacked.

But the increase in the personal allowance to £11,850 from £11,500, while always welcome, is only a saving of £70 a year. Similarly, the increase in the higher rate tax threshold from £45,000 to £46,350 will only generate a saving of £270. Neither of these will make the dream of buying that first home noticeably quicker.

No mention either of issues of real concern to the older generation, such as long-term care funding, which will ultimately impact on the generations coming up behind them.

The Chancellor’s commitment to the Technological Revolution and apprenticeships, as well as funding to increase home building and to develop construction skills, is good news for the younger generation. It will also help many business owners. The early move to CPI increases on business rates and the changes to the so-called “stair case tax” will also be welcome.

The removal of the capital gains indexation allowance not so much.

So despite the initial perception of some popular moves from Hammond, my overall feeling is that of being underwhelmed. Potentially good news for those involved in technology, the Northern Powerhouse and construction arenas but not much else.

This was a light Budget for non-first-time buyers on the income, savings, investments and pension front. But this does not take away the need for sound financial planning to help people achieve the lifestyle they want and navigate the continued complexity of the financial landscape.

Claire Phillips is partner and IFA at First Wealth



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