Spring Budget 2020: key points for savers and investors

Sam Slator 11/03/2020 in Equities

It was perhaps inevitable that this Budget would be taken over by events out of its control. The Coronavirus is dominating headlines the world over and, naturally, the Government recognised that now was not the right time to be tinkering with taxation concerns and pension legislation.

So most of the comment from the Chancellor of the Exchequer concerned a commitment to ensure that the NHS had sufficient resources to cope with the escalation of the epidemic, along with some element of protection for both firms and workers who were directly affected by it.

A lot of the spending headlines were around the broader long term ‘Infrastructure Revolution’ with various announcements around spending on road, rail, broadband and housing, which are estimated to cost around £600bn by the middle of 2025. Money has also been allocated for investment in technology and carbon capture & storage.

All of this meant that there were just two key announcements for savers and investors.

The first concerned those affected by the tapered annual allowance for pension contributions. Broadly, the income levels at which people are affected was increased by £90,000, which means it is only an issue if your income is in excess of £240,000 (rather than £150,000).

The second – not announced in the speech but hidden in the full document – was that the Junior ISA allowance is to almost double, rising from the current £4,368 to £9,000 next tax year.

Commenting on the rise, Darius McDermott, managing director of FundCalibre, said: “The increase to Junior ISA limits came as a positive surprise.

“Investing £750 a month over a period of 18 years could result in enough money to not only pay for university fees, but also the purchase of a house – or a substantial deposit. Assuming 5% annual returns, an overall investment of £162,000 would grow to a pot of money worth £261,901.52*.

“Admittedly, few people could afford to save this amount of money for their children year in year out, especially if they are also trying to save for their own ISAs – the average Junior ISA subscription according to HMRC is just £1,421** – but it does give us all something to which we can aspire.”

Three Junior ISA funds that could benefit from other Budget spending:

Investec Global Environment

Recently launched Investec Global Environment is a global equities fund that includes emerging markets, but which has a unique approach of only investing in companies that are contributing to the decarbonisation of the world economy. The portfolio has complete conviction, with just 20-40 holdings.

Liontrust UK Micro-Cap

Investing in Britain’s smallest businesses, Liontrust UK Micro-Cap only invests in profitable companies. Each holding in the portfolio must have at least one intangible asset. These include a strong distribution network, high recurring revenues or a strong brand. The team also looks for director ownership of at least 3% of the company. Currently, almost a third of the fund is invested in technology companies***.

VT Gravis UK Infrastructure Income

VT Gravis UK Infrastructure Income invests mainly in investment trusts exposed to different types of UK infrastructure: from hospitals, GP surgeries and schools to railways, roads wind and solar power. It has an income target of 5% per annum and offers an excellent way to invest in the growing need for infrastructure in the UK. It can invest in infrastructure debt, as well as equities.

Full details of what Personal Finance changes were made are as follows:

Income tax

Personal Allowance remains unchanged at £12,500.

The threshold above which higher earners start paying 40% tax is also unchanged at £50,000.

Both are due to increase in line with Consumer Price Index (CPI) in future years.

Pension changes

Standard lifetime allowance

The standard lifetime allowance for pensions will increase in line with the rise in the consumer prices index (CPI) for 2020/21 to £1,073,100.

Annual Allowance

There are no changes to pension annual allowances. The standard annual allowances remains at £40,000.

However, the high income annual allowances taper rules have been changed. Adjusted Income (the level at which income must be earned before the tapering starts) increases by £90,000 to £240,000, with the Threshold income also increasing to £200,000.

Individual Savings Account (ISA)

The ISA annual subscription limit for 2020/21 will remain unchanged at £20,000.

The annual subscription limit for Junior ISAs and Child Trust Funds for 2020/21 will be increased to £9,000.

Capital Gains Tax

The capital gains tax allowance has increased to £12,300.

Inheritance Tax

Inheritance tax rates and exemptions
The IHT Nil Rate Band will remain frozen at £325,000 until 2021/2022 as previously announced.

Residence Nil Rate Band (RNRB)
The Residence Nil Rate Band will rise to £175,000 from April 2020 as previously announced.

General Tax issues

Entrepreneur Relief has been amended with the Lifetime limit reducing from £10m to £1m.

Corporation Tax remains unchanged at 19%.

National Insurance Contribution Tax threshold increases from £8,632 to £9,500.


*£750 invested each month for 18 years, assuming annual returns of 5%
**Source: HMRC ISA statistics, April 2019
***Source: Fund factsheet, 29 February 2020

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.