Below is a summary of the main budget announcements applicable to personal wealth and finance.
Pension and annuities
The Lifetime Allowance(TLA) for pensions will be reduced from £1.25 million, from April 2016. Fixed and individual protection will be available for those who think they may be affected by this change. The allowance will then be indexed to increase annually by CPI, from April 2018.
The government will legislate from April 2016 to allow people who are already receiving income from an annuity to agree with their annuity provider to assign their annuity income to a third party in exchange for a lump sum or an alternative retirement product.
From April 2015, beneficiaries of individuals who die before age 75 with a joint or guaranteed life annuity will receive benefits tax free. This will apply where no benefits have been paid out prior to 6 April 2015. Where death occurs post age 75, tax will be due at marginal rates. The rules are also to be changed to allow any beneficiary to be named on a joint life annuity.
National Savings & Investments products
Premium bond investment limits will increase to £50,000 from 1 June 2015, as planned.
Inheritance Tax
As announced in the AutumnStatement, it has been confirmed that the government will not introduce a settlement nil-rate band in respect of relevant property trusts. New rules will be introduced to prevent the use of multiple trusts to avoid tax, particularly in connection with the set-up of discretionary trusts used with Will planning. The calculation method will also be simplified, primarily removing the need to include non-relevant property in the computation.
A review of the use of deeds of variation for tax purposes is to be undertaken in the summer. An announcement is expected in the Autumn Statement (December 2015).
Capital Gains Tax
From the 6 April 2015, non-UK resident individuals, trusts, personal representatives and narrowly controlled companies will be subject to CGT on gains accrued on the sale of a UK residential property. Rates will be the same as applicable to UK residents – 18% and 28%.
The government will restrict the use of private residents relief where the property is located in a jurisdiction in which the tax payer is not resident. A 90 day occupancy test will apply to those potentially still able to claim relief.
The government has announced that it will target structures set up purely so people with a small indirect stake in a company, can benefit from entrepreneurs’ relief. They will also ensure the relief can only be used when disposals of personal assets relate to a meaningful withdrawal from the business.
Individual Savings Accounts (ISAs and Junior ISAs)
Effectivefrom 1 July 2015, the following investments will also be able to be held in an ISA – bonds issued by co-operative societies and community benefit societies, and SME securities that are admitted to trading on a recognized stock exchange.
Flexibility will also be introduced to allow withdrawals and investments to be made in any year, without the reinvestments counting towards annual ISA allowance, set at £15,240 for the 15/16 tax year.
A new ‘Help to Buy ISA’ is to be introduced, to help those saving to purchase their first home. For every £200 saved by the investor, the government will provide a bonus of £50, up to a maximum of £3,000 on £12,000 of savings. Savers will be able to access their savings as they could with a standard ISA however, the bonus will only apply when used for a house purchase.
Anti-Avoidance and the General Anti-Abuse Rule (GAAR)
The UK has now reached agreement with 92 countries, including the Isle of Man, to automatically exchange information on accounts held by residence of these countries. These agreements are reciprocal and represent an unprecedented change in HMRC’s powers to tackle tax evasion.
Further measures will also be introduced to strengthen already existing anti-avoidance and GAAR legislation.
Corporation Tax
The main rate of corporation tax has been confirmed at 20% for 2016 financial year as previously announced.
National Insurance
Class 2 National Insurance, paid by the self-employed, will be abolished in the next parliament.
In addition, employer National Insurance contributions are to be abolished for staff under the age of 21, from April 2015, and for apprentices from April 2016.
Income Tax rates and allowances
The personal allowance has been confirmed as £10,600 (15/16), increasing to £10,800 (16/17) and £11,000 (17/18).
The amount of total income before higher rate tax will be payable, is set to increase to £42,700 by 16/17 and to £43,300 by the 17/18 tax year. This is higher than previously announced.
The transferrable personal allowance that can be passed between spouses and civil partners increases to £1,100 from April 15.
From April 2016, the first £1,000 of savings income for basic rate tax payers (£500 for higher rate tax payers) will be tax free.
Non-domiciles
As announced in December, the remittance basis charge will increase from £50,000 to £60,000 for those UK resident for at least 12 of the last 14 years. A new £90,000 charge will also be introduced for those resident for 17 of the last 20 years.
Tax self-assessments
In a bit to simplify taxes for the majority, the need to complete an annual tax return is being removed. Online accounts are to replace current paper returns. Initially small businesses and 10 million individuals will be transferred to an online return account. This should be completed by 2016, with the reminder expected to be online by 2020.
Bands of taxable income and corresponding tax rates
2014-2015
2015-2016
Basic rate
20%
20%
Higher rate
40%
40%
Additional/Trust rate
45%
45%
Starting rate for savings income
10%
0%
Dividend ordinary rate
10%
10%
Starting rate limit (savings income)
£2,880
£5,000
Basic rate band
£0 – 31,865
£0 – 31,785
Higher rate band
£31,866 – 150,000
£31,786 – 150,000
Additional rate band
Over £150,000
Over £150,000
Income tax allowances
2014-2015
£ a year
2015-2016
Change
Personal Allowance
those born after 5 April 1948
10,000
10,600
600
those born between 6 April 1938 and 5 April 1948
10,500
10,600
100
those born before 6 April 1938
10,660
10,660
–
Income limit for personal allowance (*1)
100,000
100,000
–
Income limit for personal allowances
(born before 6 April 1948) (*2)
27,000
27,700
700
Transferable Tax Allowance for married couples
and civil partners (*3)
–
1,100
–
*1 The personal allowance reduces where the individual’s income is above this limit by £1 for every £2 above the limit. This applies regardless of the individual’s date of birth.
*2 This allowance reduces where the individual’s income is above the income limit by £1 for every £2 above the income limit until it reaches the level of the personal allowance for someone born after 5 April 1948.
*3 Available to spouses/civil partners born after 5 April 1935. This allowance is 10% of the personal allowance for those born after 5 April 1938. It allows a spouse or civil partner who is not liable to income tax above the basic rate to transfer this amount of their personal allowance to their spouse/civil partner. The recipient must not be liable to tax above the basic rate. The recipient is eligible to a tax reduction of 20% of the transferred amount.
The above information is based on the 2015 Budget released on 18th March 2015 and is not guaranteed to become law.
Source: Friends Provident International
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