It’s that time of year again – the Chancellor of the Exchequer, George Osborne, has announced his Budget for 2015, and with an election just around the corner, there was some good news for savers, pensioners with annuities, and first time buyers.
Here we summarise the key points of the Budget;
The 2014 Budget surprised everyone with a revolution in pension freedoms – which are due to come into force on 6th April 2015.
The Chancellor confirmed that the Treasury will consult on extending pensions freedoms to 5million people with existing annuity plans in April 2016. This will mean that people currently locked into an annuity income for life will have the opportunity to sell their annuity to raise a capital lump sum or convert their annuity into a drawdown fund.
It’s welcome news and for many people it will be sensible to review their existing annuities. However annuities may still be suitable for some and before making any decisions about giving up your annuity it’s important that you seek independent financial advice.
The other major pension change in the Budget was confirmation that the lifetime allowance for pension savings will reduce again from £1.25million to £1million, meaning that more people will be caught by it.
As with previous reductions in the lifetime allowance, protection measures will be introduced so that it is not applied retrospectively. It’s very important if you have pension savings close to or in excess of £1million that you seek advice to make use of the new protections.
Welcome news for first time buyers will be the introduction of a new Help to Buy ISA. For every £200 saved by a first time buyer, the Government will add another £50 which means if you add £12,000 to an ISA, the Government will top up with £3,000 more. This is due to be introduced in the Autumn and details of how it will work in practice will be revealed at a later date.
The biggest news in relation to ISAs is the further relaxation of ISA rules. From Autumn 2015, money can be taken in and out of an ISA in a tax year without losing the tax-free allowance.
The Chancellor also announced that the first £1,000 of interest paid on savings accounts will be tax-free – effectively introducing a new savings personal allowance.
The Government is hoping that its savings revolution – following hot on the heels of its pensions revolution – will be a vote-winner in the May election.
Death of the Tax Return
One of the biggest surprises in the Budget this year was the pronouncement of the ‘death of the tax return’. The dreaded annual paper tax return for self-employed people has been abolished by the Government and will be replaced by a new online account which will enable them to see how much is owed and pay their taxes at a time that suits them.
Personal Tax Changes
There were also changes to tax rates and allowances. The Personal Allowance will increase to £10,600 on 6th April and will continue to increase to £11,000 by 2017/18.
The higher-rate tax threshold, above which tax is paid at 40%, will also rise from £42,385 this year to £43,300 next year.
To arrange a consultation meeting with a Cambrian adviser to discuss the Budget changes, call us on 01244 539595.
This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice as at 19/03/2015. You are recommended to seek competent professional advice before taking any action.