Following the Chancellor’s Budget on 8th July , we have provided a helpful summary of the main headlines below which may be of interest to you:
Tax-free Personal Allowance
– The tax-free personal allowance will be increased from £10,600 in 2015-16 to £11,000 in April 2016. The higher rate threshold will increase to £43,000 from April 2016.
Dividend Tax Reform – Dividend tax credit (reduces amount of tax paid on income from shares) will be replaced by a new £5,000 tax-free dividend allowance for all tax-payers from April 2016. Tax rates on dividend income will be increased.
Personal Savings Allowance – As announced in the March Budget 2015, the government will introduce an allowance from 6 April 2016 to remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers. Additional rate taxpayers will not receive an allowance. Automatic deduction of 20% income tax by banks and building societies on non-ISA savings will cease from the same date. The government will shortly publish a public consultation on whether changes are required to the deduction arrangements in place for other savings income (Finance Bill 2016).
Extending ISA eligibility – The government will introduce the Innovative Finance ISA, for loans arranged via a P2P platform, from 6 April 2016 and has today published a consultation on whether to extend the list of ISA eligible investments to include debt securities and equity offered via a crowdfunding platform.
Making ISAs more flexible – March Budget 2015 announced that the government will change the ISA rules in the autumn to allow individuals to withdraw and replace money from their cash ISA in-year without this replacement counting towards their annual ISA subscription limit. This policy will also cover cash held in Stocks and Shares ISAs. These changes will commence from 6 April 2016.
Taxation of pensions at death – As announced at Autumn Statement 2014, the government will reduce the 45% tax rate that applies on lump sums paid from the pension of someone who dies aged 75 and over to the marginal rate of the recipient from 2016-17 (Summer Finance Bill 2015).
Secondary market for annuities – Following consultation, the government has decided to delay implementation of this measure until 2017. Further plans will be set out for introducing this measure in the autumn (Finance Bill 2016).
Lifetime Allowance for pension contributions – The government will reduce the Lifetime Allowance for pension contributions from £1.25 million to £1 million from 6 April 2016. Transitional protection for pension rights already over £1 million will be introduced alongside the reduction to ensure the change is not retrospective. The Lifetime Allowance will be indexed annually in line with CPI from 6 April 2018 (Finance Bill 2016).
Pensions: reduced Annual Allowance for top earners – Benefits of pension’s tax relief to be restricted for those with incomes, including pension contributions, above £150,000 by tapering their Annual Allowance to a minimum of £10,000. This policy will come into effect from April 2016 (Summer Finance Bill 2015).
Alignment of Pension Input Periods – All pension input periods open on 8 July 2015 will end on 8 July 2015. The next pension input period will be 9 July 2015 to 5 April 2016 for these arrangements. This means that all existing arrangements on 8 July 2015 will have two or three pension input periods ending in tax year 2015-16 (depending on the start date of the open pension input period). For new arrangements where the first pension input period starts on or after 9 July 2015 will end on 5 April 2016.
Transitional rules are being introduced for those individuals who may have put in pension contributions of more than £40,000 prior to the Budget, on the expectation that these contributions would be tested against the annual allowance for tax years 2015-16 and 2016-17. Pre-Budget savings of up to £80,000 will be protected from an annual allowance charge.
Pensions tax relief – Treasury has published a consultation on reforming pensions tax relief by making them more like ISAs.
Pensions Wise – Access to Pension Wise service will be extended to those aged 50 and above.
Family home removed from Inheritance tax – From April 2017, each individual will be offered a new family home allowance so they can pass on their home to their children or grandchildren tax-free after their death. This will be phased in from 2017-18 and will be added to the existing £325,000 Inheritance Tax threshold meaning the total tax-free allowance for a surviving spouse/civil partner will be £1m in 2020-21. The allowance will be withdrawn for estates worth more than £2m.
Corporation Tax – Corporation tax will be cut to 19% in 2017 and 18% in 2020.
Standard rate of Insurance Premium Tax – This will increase to 9.5%.
End of permanent non-dom status – Non-domiciled individuals live in the UK but consider their permanent home elsewhere and they only pay UK tax on their offshore income when it is brought into the UK. Permanent non-dom status will be abolished from April 2017 so that anyone who has been resident in the UK for 15 of the last 20 years will be considered UK-domiciled for tax purposes.
Further information can be found Here
- Budget 2017
- Pension information in the 2016 budget – Knowing your LISAs from your ISAPs
- Finance Bill 2017 | Expat Advice
- Pension lifetime allowance
- QROPS Budget 2017
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