Tax on the sweet stuff but no reforms to pensions
And so another budget announcement was presented to us yesterday by the Chancellor George Osborne, and as indicated in the media over the past few weeks, the pension reforms did not go ahead. Great news for some, but there are still some key deadlines that need to be met over the next 12 days to benefit from this year’s allowances.
As well as detailing the key changes that could affect your financial portfolio, we have also highlighted the tax year end deadlines that everyone should be aware of. There is still time to fully utilise your allowances, but don’t delay any further.
What should you be thinking about now with only 12 days till tax-year end?
1. Fully utilise your ISA allowance – £15,240 per individual and this includes stocks and shares ISA’s which may be a better option with the current low interest rates on the market.
2. Maximise your pensions contributions – Up to £40,000 for 2015/16 tax year plus any unused allowance for 2012/13 tax year before it is lost.
3. Use your annual allowances – Capital Gains Tax Allowance £11,100 and Inheritance Tax Allowance £3000
4. Business owners should declare dividends now to avoid higher future dividend tax
If you’re concerned about how you’re going to maximise your allowances in the time frame, call us today on 01273 208813.
What were the main movers and shakers in yesterdays budget announcement that could affect your financial portfolio?
Personal allowance
The tax-free personal allowance is being increased to £11,000 in 2016-17, and £11,500 in 2017-18.
For higher rate taxpayers, the government will also increase the threshold above which higher earners start paying 40% tax. It will increase to £43,000 in 2016-17, and to £45,000 in 2017-18.
ISAs
The overall ISA subscription limit is being increased from £15,240 to £20,000 with effect from 6 April 2017. The Government has also announced a new Lifetime ISA for those aged between 18 and 40 which will become available from April 2017. This new ISA will allow savers to contribute up to £4,000 each tax year (within the overall annual subscription) and receive a 25% bonus on those contributions from the government at the end of each tax year.
Capital Gains Tax rates
CGT rates will reduce from 18% to 10% (basic rate) and 28% to 20% (higher rate) for chargeable gains, except those made in relation to chargeable gains accruing on the disposal of residential property (that do not qualify for private residence relief), and receipt of carried interest. Trustee rate of CGT will also be reduced to 20% unless the gain is from residential property.
Pensions – Lifetime Allowance to reduce from £1,250,000 to £1,000,000
A member of a registered pension scheme can currently crystallise up to a value of £1,250,000 (Lifetime Allowance) and not be subject to any additional tax charges. Usually, 25% of the payment can be taken tax-free with the balance taxable as income. This limit for the Lifetime Allowance will reduce to £1,000,000 in 2016/17. The Lifetime Allowance is currently scheduled to begin to rise in line with the consumers prices index (CPI) from 06/04/2018
Changes to death benefit taxation
If a member of a registered pension scheme dies on, or after, their 75th birthday, and the death benefit is not paid to a UK charity within two years of the date that the scheme administrator became aware of the member’s death, any payment to a ‘qualifying person’ (i.e. an individual in their own capacity) would be taxed at the recipient’s marginal income tax rate(s) using the pay as you earn (PAYE) system.
New State Pension introduced
The full new State Pension will be £155.65 per week.
Corporation Tax
Corporation tax will be reduced to 17% in 2020.
National Insurance – From April 2018, self-employed people will only need to pay one type of National Insurance on their profits, Class 4.
If you have any queries regarding any aspect of yesterday’s budget announcement and want to speak with one of independent financial advisers
then please get in touch and we will be more than happy to help.
Email [email protected] or call 01273 208813
For more information about pensions please click here
This article was originally published on Thursday, March 17, 2016 – 11:58
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