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2018 Autumn Budget

Author: Ian Davis - Bullion Manager

Published: 31 Oct 2018

Last Updated: 20 Aug 2019

So, this is it the end of austerity! Cheery Phil has delivered an optimistic budget, but a lot of the policy and spending plans hinge on a successful Brexit deal. 

This budget, in my opinion, appears to see the Conservatives reaching out to the centre or left of centre with NHS pledges, social care funding and raising the living wage. This is possibly a political bid to appease more voters. 

We will start with money related matters and savings as this is likely more interesting to our readers who buy gold and silver. 

Everything in this article is my opinion and does not constitute financial advice.

Income Tax

I, like many others, welcome the income tax threshold being raised a year earlier than planned. Living costs have been increasing and it will be great news to many to have more money in their pocket and less going to the taxman. The personal allowance (0%) is to rise to £12,500 and the higher rate (40%) lifted to £50,000.

I do acknowledge that paying some form and quantity of tax is needed for public services, but I do sway politically left to right quite often and on a broad range of policy. I don’t think existing at either extreme is a benefit to the individual or society at large. Just take North Korea and America as the two extreme respective examples. The idea of paying taxes to improve public services, roads, police etc. is socialist and with correct deployment (which is monumentally difficult) probably improves the overall country but certainly opens the system up to an awful lot of abuse and corruption which we seem unable to manage effectively. As a result, I’m usually torn on tax matters. The scale of abuse I can’t quite get a handle on to make a final decision on how much tax an individual should pay via their income. For now, I believe the individual is paying a little bit too much tax and would like to see this reduced further. I say this as the tax shortfall could be made up by tax avoiding large foreign companies selling services in the UK. More on that later.  

Self-employed individuals are going to be taxed more in particular if their employment arrangement is as a de-facto employee. We gather this means they are irreplaceable by another "agency" member of staff or have been trained into a position of specialisation. In this instance the government wish they are treated as an employee with the same tax liabilities etc. 

ISA's

The annual subscription limit will remain unchanged at £20,000 and for a junior ISA will link to the consumer price index. So very little to scream about here I’m afraid. If I had a spare £20,000 I would be buying gold or silver, or both! You might say I am biased, I probably am, but I believe in wealth as gold and silver rather than money. 

Property

Stamp duty relief has been extended on shared ownership homes up to £500,000. This builds on last year’s announcement that duty would be scrapped on property up to £300,000. I had not long bought a house and got stung with this tax, so I am pleased to see other first-time buyers avoiding paying this tax. Whether this indirectly pushes house prices up we will see in due course and what this does to address the wider housing crisis is very little really. 

There is a general political shift to prevent or discourage the buying of second homes to let. The tightening of private resident relief probably forms part of this wider agenda, as if higher capital gains tax and stamp duty wasn't already enough! Labour has proposed a radical double council tax rate should they be voted in which adds another potential liability. If I were in a position and thinking of a second property right now I would think twice, buy gold, and wait for the market to offer more incentive to invest. 

Other Intersting Announcements

Digital services tax is a step in the right direction to deal with foreign tech companies selling services (and making a fortune) in the UK and paying next to no tax for the privilege. For example, Google sell in the UK but operate out of Dublin paying a fee to the UK branch to act as an agent. This means sales revenue (and tax) is handled in Dublin at a corporation tax rate of 12.5% (the UK is 19%). In 2012 Google UK had a revenue of £4.9bn, was paid an agent fee of £396m, made an accounting profit of £31m and paid only £6m in corporation tax (source bbc). The process is of course legal, though savagely imbalanced and unfair in the wider tax system. Therefore, as mentioned earlier, I support reduced tax on the individual and a balancing out of corporation tax due in these cases. For instance, we sell goods and services within the UK the same as Google, likely to the exact same customers, but we are made to pay 19% tax on our profits. That surely is unfair! I wonder if you agree with me?  

The millennial railcard is about 1 year to late for me! I must say recent efforts to book trains and face over £100 in fares is going to immobilise the country. In this instance I stayed at home and I don't think I would be the only one! I am an advocate of reduced traffic on the roads but how can this ever be achieved when using trains or buses are just so expensive. Maybe Uber have the answer with driverless and ownership free electric cars that are instantly available at the touch of an app to ride share. I am excited at this prospect and being able to read a book, or continue snoozing, whilst "driving" to work. 

NHS funding - has been increased and this will be good news for a strangled public service. I believe in access to healthcare and that should be free but up to a point. How is it economically possible to sustain an ageing population, often with co-morbidities, to an endless degree I am unsure. I know NICE exists which essentially provides an agreed care budget by analysis of quality of life years but even this seems to have little bounds. The system is also open to horrible abuse and anyone who has been in to A and E late at night will see this first hand. Maybe a middle ground of public emergency and essential social care with a private healthcare add-on is the answer. Who knows? We are certainly seeing privatisation of the NHS and no one really knows if this will result in a better system, though we have every right to be sceptical given the situation in countries like the USA. 

Pensions - have remained untouched. It is likely this is a political gamble to appease voters as many expected the overhaul proposed by Chancellor Osbourne to kick in. So far so good for the tax payer. 

There is obviously a lot more to the budget and if your interested please go and read further. I have handpicked a few points for discussion that may be worth considering if you have money to invest or wondering if gold and silver are an option to ISA's or property.  

You may wish to read more articles in our market news section. 

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