In his Budget speech Chancellor George Osborne introduced some measures that were surprising, such as the Personal Savings Allowance of £1,000 of tax-free income for basic rate tax payers (£500 for higher rate), although the actual details are not yet clear.
However, from April 2016, banks and building societies will no longer have to deduct 20% tax on your savings. That has to be good news.
Personal tax allowances will increase but not until 2016 and again in 2017; a rise now would have been welcome.
Additional flexibility will be given to ISAs, but not until later this year, which will enable you to draw out funds and replace them in the same year without it affecting your allowance. This will give a little more flexibility with planning.
The ’Help to Buy’ ISA is definitely an innovation for first time buyers, with the Government adding bonuses of up to £3,000 on £12,000 of savings. But will this really help those struggling to get on the housing ladder? Any help is better than none, but could it have been achieved in other ways? Deferred mortgage payments?
The Lifetime Allowance (that is the amount you can accrue in a pension pot without having to pay a tax charge) is reduced from £1.25m to £1m, not that this will affect too many of our clients. The introduction of being able to assign an annuity to a third party for cash may be attractive for some, but wait for the detail as it is complex.
Making tax easier with the new digital accounts sounds great, but it is some way off and will the reality live up to expectation? Watch this space.
On a more sombre note, the Government is to look into the use of Deed of Variations, quite a legitimate way of changing a Will following death in order to bypass a generation, and plans to target specific areas of what it sees as IHT avoidance. All of this, despite the promise if elected, to increase the non-taxable amount of estates to £1m.
As usual we will keep you updated on changes that are specific to you, but do contact us for advice and guidance on the changes, which at first sight seem just unbelievable.