A few snippets from Chancellor George Osborne’s Autumn Statement 2015 on 25th November 2015.
The starting rate for the new flat rate State Pension will be £155.65 per week from April 2016 for new eligible claimants with 35 qualifying years (based on National Insurance contribution record). The existing Basic State Pension will increase to £119.30 per week.
The Government will respond to a consultation on pension tax relief in the Budget 2016. Change is coming so it makes sense to maximise opportunities with the current system particularly for higher and additional rate taxpayers.
Legislation will come forward to ensure that inheritance tax will not apply on pension drawdown funds that have not been taken as benefits before death.
The standard Annual Allowance will remain at £40,000 in 2016/17 but the Lifetime Allowance is reducing to £1m from £1.25m from April 2016. Transitional protection will be available in the form of Fixed Protection and Individual Protection 2016. Those applying for Fixed Protection must cease contributions/accrual by 5th April 2016. The protection application process will not be available until July next year so planning must be undertaken ahead of this. Individuals in a position to do so are still able to apply for Individual Protection 2014 until 5th April 2017.
Further information will be forthcoming in respect of the secondary annuity market which will give annuitants the right to sell their annuity income stream.
Individual Savings Accounts (ISAs)
The current ISA limit will remain unchanged at £15,240 in 2016/17 as will the Junior ISA Limit of £4,080.
Help to Buy ISAs will be available from 1st December 2015. These will allow first time buyers aged 16 and over to save up to £200 per month, as well as an initial investment of up to £1,000, towards a deposit on their first property purchase. The Government will provide an incentive of £50 for every £200 saved up to a maximum of £3,000 on savings of £12,000. Property price limits apply of £450,000 in London and £250,000 elsewhere.
Personal Savings Allowance
Banks and building societies currently deduct tax at 20% from gross interest unless a non taxpayer has claimed exemption. This will cease from 6th April 2016 when all interest will be paid gross.
The first £1,000 of savings income received by a basic rate taxpayer will be tax free whereas a limit of £500 will apply for a higher rate taxpayer. No allowance will be given to an additional rate taxpayer.
Inheritance Tax (IHT)
The summer Budget introduced an additional nil rate band that will apply on residential property passed down to a direct descendant on death. This will be the lower of the net of mortgage value of the house and the amount of band. Unused band will be transferable between spouses as is the main nil rate band.
The maximum amount of band will be phased in as follows:
£100,000 in 2017/18
£125,000 in 2018/19
£150,000 in 2019/20
£175,000 in 2020/21
The band will reduce by £1 for every £2 on estates worth £2m+.
The main nil rate band will remain unchanged until 5th April 2021.
Stamp Duty on Buy to Let Properties
From April 2016, buy to let purchases in England and Wales will be subject to a 3% surcharge on standard stamp duty rates. For example, for a property worth £200,000, the tax will be 5% instead of 2%, an increase of £6,000.
Something that will not be news to many is the abolishing of the dividend tax credit from April next year and new rates of dividend income tax as follows:
7.5% basic rate
32.5% higher rate
38.1% additional rate.
The first £5,000 of dividend income will be tax free.
Venture Capital Trusts (VCTs)
With effect from 30th November 2015, the provision of reserve energy generating capacity and generation of renewable energy that already benefits from Government support will no longer qualify for VCT investment as not to offer tax relief additionally.