The Lifetime Allowance is set to rise in line with inflation from next April, but the Isa allowance will remain at £20,000.
As expected, the Lifetime Allowance (LTA) will rise in line with inflation (consumer price index) to £1,055,000 from next April, it was announced today in the Autumn Budget.
The LTA, essentially a stealth tax on investment success, has been progressively whittled away to boost the Treasury coffers since it was introduced in 2006 by the then chancellor Gordon Brown. But last year, when the LTA stood at £1 million, it was announced that it would from now on be increased each year in line with inflation. Therefore, today’s announcement does not come as a surprise.
Elsewhere, the Individual Savings Account (Isa) annual subscription limits will remain at £20,000. The allowance has never been more generous nor has the choice, as savers and investors now have seven different Isa types to choose from.
The Junior Isa limit will rise in line with CPI inflation to £4,368. This same limit will apply to Child Trust Funds (CTFs). In addition, it was announced that the government will publish a consultation next year on draft regulations for maturing CTF accounts.
The lack of change to the Isa allowance does not come as much of a surprise. Two years ago, the allowance stood at £15,240, before being raised to £20,000 in April 2017. The increase surpasses rises in inflation since the Isa was introduced in 1999, when the allowance stood at £7,000. Moreover, only small numbers of savers and investors make use of the full allowance.
“With the uncertainty of Brexit looming larger than ever over the public purse, it is unsurprising that today’s Budget has proven to be a damp squib from a private wealth and capital taxes perspective,” says John Annetts, partner and head of administration of estates at Howard Kennedy.
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