It only seems like five minutes ago that we were writing about the Budget here at GreenSky HQ. But then, an incredible General Election result made a new, Tory-only Budget highly likely, and just four months later, that’s what we’ve got. It’s feeling a bit like Groundhog Day…
Budget day itself was, as usual, a frenzy. Most British news sites ran continuous coverage throughout the day (and after, in some cases) as they dissected each point. Now that the sharks are no longer circling the water, and the calm seas have returned, let’s take a look at three things that made us sit up and take notice.
The aim of getting the country back in black is still the priority
For a long time, the UK has had a large deficit. Not USA large, but enough for it to be a problem that has had politicians scratching their heads. In the March Budget, a surplus of £5.2bn, rather than a debt, was forecast for 2018-19, but that has been updated, and it’s not going to happen as quickly as planned. For 2018-19, the forecast has been revised to a £6.4bn deficit, with the surplus now coming a year later in 2019-20.
This isn’t necessarily a surprise, as many commentators had noted how unlikely it would be for the government to eliminate the deficit in the original, aggressive timeframe. Now the projections have been toned down slightly, with George Osborne telling the House of Commons that the new plan is a ‘smoother ride to the same destination’. Hopefully, this will come in the form of a noticeable loosening of the planned squeeze on public services spending that was outlined by the coalition government in March.
The living wage grabbed the headlines
If you picked up the papers the day after the Budget, the ‘living wage’ was the big headline. It could have been a Labour pledge – a boost for low-paid workers, with a minimum hourly rate of £7.20 introduced for people over the age of 25, rising to £9 by 2020. It repositioned the Tories as the party of the working people, something that has been Labour’s tag for years.
Since the announcement, critics have been out in force. To pay for the increased wages, jobs will have to go. It’s unfair on the pub industry in their battle with the supermarkets over the price of booze. It’s the consumers that will pay the price overall. Any announcement is going to annoy someone – that’s the way of the world. Yes, prices in the pub may rise, but if that’s by a few pence, it’s not going to make a dent in your wallet, and it might make a huge difference to someone working for minimum wage.
If you’ve got a spare room, it might be time to let it out
Norfolk, as we all know, is awesome. The Broads, Norwich Castle with its museum and gallery, and a whole host of other attractions and cultural events make Norfolk a fantastic tourist destination. And if you’ve got a spare room, 2016 will make letting that room out even more attractive, as from April next year the tax-free allowance on income you can earn from a lodger will increase to £7,500. Incredibly, it’s the first increase in almost 20 years.
For anyone with a spare room, this presents opportunities. If you’re in an area of Norwich that is walking distance to the City Centre or with good connections, you might find that renting out your room on a longer term basis might attract plenty of potential lodgers. If you’re in an area in Norfolk which is near a recognisable tourist attraction, then short term lets through a site like Airbnb might be worth considering. Obviously this means having people stay in your house, but if the idea of meeting new people appeals and you have the space, then it’s certainly a way for you to maximise the space in your home in a way that’s tax efficient.
Checking the small print
There’s always more to the Budget than meets the eye, and this one was no exception. While the living wage was a welcome move, for example, it clearly came at a cost to things like the student maintenance grant – which was scrapped altogether – and an overhaul of the tax credit system. The money always has to come from somewhere.
What you do with the Budget information, and what parts of it affect you, are always down to your individual circumstances. But, with changes to pensions, inheritance tax and income tax brackets all happening, it may well be time for you to update your financial plans. Need some help? That’s what we’re here for.
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