You will have found it difficult to miss the budget on 18th March, when George Osborne set out his final budget before the General Election in less than six weeks’ time. You will have seen many a summary by now, but here are the most salient points:
Income Tax & Capital Gains Tax
-The personal allowance will rise to £10,600 on 6th April, then to £10,800 in 2016 and £11,000 in 2017.
-A spouse or civil partner who is not liable to pay Income Tax can pass 10% of their personal allowance (£1,060) to their spouse if they are a basic rate tax payer – saving £212 in Income Tax.
-The Chancellor proposed to scrap the annual tax return and to have in its place a digital tax system which will streamline our tax affairs – this will be implemented over the next Parliament.
-From 6th April 2016 basic rate tax payers will be able to receive £1,000 in savings income before tax is deducted. For higher rate tax payers this will be £500.
-The Capital Gains Tax allowance will be increased to £11,100 for individuals and £5,500 for trusts.
-The Inheritance Tax threshold has been frozen at £325,000 until 2017/2018.
-Deeds of Variation will be reviewed to ensure they do not encourage IHT avoidance.
-The amount you can save into a pension will be limited to £1million from 6th April 2016. It will then increase annually in line with the CPI from 6th April 2018.
-From April 2016 the government will remove the restrictions on buying and selling annuities, so that the 55% tax will not apply. Instead, an individual’s marginal rate of tax will be applied if selling on their annuity.
-Drawdown pensions will become Flexi-Access pensions, with no limit on the amount of income that can be drawn. Any income drawn will be taxed at the recipient’s highest marginal rate of income tax.
-The annual allowance will increase to £15,240 for the new tax year. For Junior ISAs it will be £4,080.
-Savers will now be able to withdraw and then replace money in their Cash ISAs without using or going over their annual allowance, providing the withdrawal and replacement are made within the same tax year.
-A new ‘Help to Buy’ ISA was announced to assist first-time buyers to save towards their first property purchase. For every £200 saved by an individual, the government will add £50. This will be by way of a bonus when a property is purchased and will be limited to £3,000 per person. New accounts will be available for 4 years, but once opened there is no limit on how long the account can be held. The bonus will be available on houses up to £450,000 in London and £250,000 outside London. They will be available from Autumn 2015.
-ISAs can be inherited by a spouse or civil partner on deaths occurring after 4th December 2014.
There were no great surprises or ‘rabbits pulled out of the bag’ by the Chancellor in the budget; it was relatively safe as far as budgets go. We can only wait to see how much of it will be implemented in April 2016, after the General Election.