The Budget summary March 2013 - a look behind the headlines


The Chancellor hardly had a great hand to play with in the recent Budget and the economics certainly looked grim, but I want to focus on a few financial planning issues that may affect you - behind and around the main headlines.

  1. How to keep your Child Benefit. This is worth £1,752 every year for a family with 2 children. It’s at threat if either parent’s income exceeds £50k a year, and is lost completely if this figure rises above £60k.The best way to “keep” your Child Benefit is to make a pension contribution – for example, if your income is £60k, making a £10k gross pension contribution ‘reduces’ your income to £50k. You will then be able to keep your Child Benefit AND a £10k investment only costs you £6k to make!
  2. Does your child or grandchild have a Child Trust Fund? You may well feel that these have been abandoned by the Government. Well, finally, legislation is expected (Finance Bill 2014) to allow existing Child Trust Funds to be transferred into the new Junior ISAs (hooray!).On-going contributions of up to £3,600 can be invested, but just remember that the child can access their ISA at age 18 - too early in our opinion!
  3. The increase in income tax-free Personal Allowance will increase to £10,000 in 2014/15. Remember though that most of us still have to pay National Insurance “tax” on income from £ 7,592 (2012/13).
  4. If you are in “Pension Drawdown”, the increase from 100% to 120% reverses the earlier reduction. So we can now draw a higher income via drawdown (from the start of the next drawdown year after 25th March 2013).
  5. There are no changes to pensions Tax Relief, but from 2014/15 the pension Annual Allowance drops to a maximum tax-relieved contribution of £40,000, with the Lifetime Allowance reduced to £1.25m.So, we are allowed to invest less now – but at least there is time to plan for this.
  6. The new “flat rate” State Pension of £144 per week will start from April 2016 - a year earlier than planned!
  7. Good news for many of our Director clients with the cut to employer national insurance contributions and on Corporation tax which reduces from 21% to 20% from April 2015.

Our article 'The Budget Summary 2013 - the full run down' gives the full details of the Chancellor's speech.

If you have any questions about how these changes may affect you and your financial planning, just get in touch.

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Adrian has a perceptive understanding of our financial situation, gives common-sense advice and is skilful in steering us in the direction he knows to be most suitable for us. Mr & Mrs S - Solihull

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Adrian Smith

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Chartered Wealth Manager

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