Following his much heralded “Freedom and choice” Budget of 2014, which led to much debate over the likelihood of Pensioners cashing in their pension pots to buy Lamborghinis, George Osborne had promised “no gimmicks” in the March 2015 Budget.
Whilst many of the proposed changes came to pass through the course of 2015, several of the major announcements will not take effect until 6 April 2016. I have highlighted some of these key changes below:
Pensions Tapered Annual Allowance – perhaps the area of greatest concern for many of our clients, the new tax year will see anyone earning over £150,000 (including pension contributions) have their £40,000 annual allowance reduced by £1 for every £2 of income over £150,000, ultimately reducing the annual allowance to £10,000 for those with income of £210,000 per annum.
Lifetime Allowance – another contentious reduction in the Lifetime Allowance, from £1.25m to £1m as of 6 April 2016, will see many more clients affected and in need of advice. As with previous iterations there will be some protections available – fixed and individual – which will help protect pension pots up to the value of £1.25m. The rules in relation to these are complex and advice should be sought immediately by those affected, before they make any contributions to their plans in the 2016/17 tax year.
Capital Gains Tax – a welcome tax cut from today’s Budget that will see the current rates of capital gains tax cut from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers. One key exclusion here will be residential property. Whilst capital gains tax does not apply to your main home, the existing 18% and 28% rates will still apply to any additional residential property, such as buy to let.
Dividend Tax – in the new tax year the notional 10% tax credit on dividends will be abolished. Instead, the first £5,000 of dividend income each year will be tax free. Sums above that will be taxed at 7.5% for basic rate, 32.5% for higher rate and 38.1% for additional rate taxpayers.
Cash ISA Freedoms – a bit of a broken promise here, the ability to remove cash from your Cash ISA and then put it back in later in the same tax year, we were originally told would be available from Autumn 2015. This was later pushed back in the Summer Budget to 6 April 2016.
Personal Savings Allowance – a welcome shot in the arm for savers suffering from almost a decade of low interest rates, with basic rate taxpayers receiving their first £1,000 of savings interest free of tax and higher rate taxpayers able to earn £500 with no tax to pay. Banks and building societies will stop deducting tax at source.
New Single Tier State Pension – the end to the accrual of additional state pension benefits will see the new full state pension of £155.65 per week being paid. Instead of the previous requirement of 30 qualifying years to access full benefits, we will now all need 35 years and those with less than 10 years may receive nothing.
As always, get in touch with one of our Financial Planners on 01223 357131 if you need any help or advice in relation to the new regulations.
This service is provided by NW Brown & Company Limited, a subsidiary of NW Brown Group Limited, authorised and regulated by the Financial Conduct Authority to provide regulated services (191123).