Chancellor George Osborne's autumn statement has finally arrived. As predicted, he's made a few changes that might affect you personally. Here are some of the decisions you need to pay particular attention to, and how we think you should react.
Choose ISAs before pensions
As we predicted, the chancellor has gone after pensions. The good news is that the state pension will rise by 2.5% next year to £110.15 a week.
However for those not planning to just rely on this, his big move is to cut the annual allowance on pension contributions from 2014/15 by £10,000 to £40,000. Some had expected him to cut even deeper to £30,000. However he also followed it up with a cut in how big your pension pot can be (the lifetime allowance) before you have to pay tax, from £1.5m to £1.25m. In 2010 it was £1.8m.
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In some ways this is a much bigger deal than simply cutting the tax relief on contributions as some thought he might. This is because it makes it much harder for people to get around the limit by increasing their payments in the short run, and then reducing them as the limit falls. This practice of front-loading' may now be self-defeating in all but the very short term for high-earners.
This means that you should definitely consider pushing as much money as you can into an Individual Savings Account (ISA). One of the few bright spots for investors was the above-inflation increase in the ISA allowance to £11,520. He has also said he will seriously think about allowing investors to hold Alternative Investment Market (AIM) shares within their I.
Tax picture is mixed
Pensions apart, there is mixed news on the tax front.
An above-inflation rise in the personal tax allowance next year means that you don't have to pay tax on earnings below £9,440. The government has signalled that it won't adjust the clawback that occurs for those earning more than £100,000 to take account of this, so higher rate taxpayers will also benefit.
The planned increase in fuel tax has also been scrapped, rather than merely postponed. This is good news if you do a lot of driving, and raised a cheer in the House of Commons when it was announced.
Perhaps to the disappointment of Nick Clegg there will be no new tax on high-end property (the so-called mansion tax'). That will come as a relief to anyone who lives in an area where property is expensive.
However, these early Christmas presents are balanced by the fact that there are going to be a number of sneaky tax hikes. The zero rate thresholds for inheritance tax and capital gains are to rise by less than the rate of inflation, creating yet more fiscal drag' on your assets. The threshold at which the top rate of income tax kicks in is also being increased by just 1% in 2014 and 2015, a cut in real terms.
Meanwhile tax dodgers watch out - HMRC's anti-evasion budget is going to be increased by £70m in an attempt to catch people trying to cut their tax bill by bending the rules.
Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
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