Murray Asset Management – Financial Planning Team
On Monday 29th October, Philip Hammond delivered his third Budget as Chancellor and, similar to the previous two, there were few standout policy changes.
It has been commented that it was an agreeable Budget and one typical of a party running for re-election, but Mr Hammond did highlight that a more severe ‘emergency’ Budget may be required in the event of a ‘no deal’ Brexit.
Focusing on one giveaway, the personal income tax allowance will be increased from £11,850 to £12,500 for 2019/20, with the higher rate income tax threshold for residents in England/Wales/NI increased from £46,350 to £50,000. This lofty, round number was originally promised for 2020/21, but will now be enjoyed a year earlier – assuming, of course, that a Brexit deal can be agreed.
For residents in Scotland, this should prove to be interesting with the SNP’s Derek Mackay due to deliver his own Budget on 12 December.
The Scottish Government cannot control the personal allowance (as it is reserved for Westminster), although it might not be inclined to use a lower figure, in any event.
It can, however, determine the higher rate threshold in Scotland, with it already lower than that of the rest of the UK, at £43,430. It would be surprising if Mr Mackay introduces a similarly large increase and, therefore, the gap between the two parts of the UK is expected to widen from April 2019.
We previously wrote about how the gap causes some undesirable results, as certain taxes remain reserved for Westminster. If the gap widens further, it may lead mobile, high earners to move south – something which the Scottish Government should be keen to monitor before it is too late.