Chancellor George Osborne earlier today delivered his first Conservative-only Budget – his second Budget of 2015 after his party secured its first majority in Parliament for nearly 20 years in May’s elections.
Here we summarise the key points for our clients:
- A green paper consultation was announced for potential further ‘radical’ pension changes. The emphasis now will shift to encouraging more younger people to contribute to pensions in the first place – suggesting that pensions could become more like ISAs, with contributions made from taxed income, with a top up from the Government whilst it’s in the pension, with tax-free growth and tax-free income in retirement.
- The State Pension “triple-lock” will be protected.
- Pensions tax relief will be restricted for those who earn more than £150,000. The allowance will be tapered down to £10,000 from the current £40,000.
- Plans for a second-hand annuity market have been delayed until 2017 – from 2016 – after providers raised concerns.
- Pension death benefits rules were clarified. The Government confirmed that beneficiaries of pension members who die after age 75 will pay tax at their marginal rate – not at 45% as was previously thought.
Personal taxation and pay
- There will be a new National Living Wage which will replace the Minimum Wage for over 25s. This will start at £7.20 an hour in April 2016 and rise to £9 an hour by 2020.
- The tax-free Personal Allowance will increase to £11,000 in April 2016 – rising to £12,500 by 2020.
- The family home will be taken out of Inheritance Tax for the first time. From April 2017 there will be a £1m family home allowance. This includes an additional £175,000 transferable nil rate band or £300,000 for couples.
- The starting point for the 40p Income Tax rate will increase from £42,385 to £43,000 from April 2016.
- The Government did not announce any changes to “Salary Sacrifice” arrangements but confirmed that they would monitor them, meaning they could be under threat at a future Budget.
Savings and Investments
- The dividend tax credit will be scrapped – to be replaced with a new £5,000 tax-free annual allowance for dividends. The rate of tax payable on dividends will increase – the new rates will be 7.5%, 32.5% and 38.1%. The changes will mean that dividends payable within pensions and ISAs will benefit as the tax credit will no longer be deducted at source.
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 08/07/2015. You are recommended to seek competent professional advice before taking any action.