Below are the highlights from today’s Budget concerning personal tax, savings and pensions.
– Personal allowance will increase to £10,500 from April 2015.
– Tax Rates – the HR threshold will be increased to £42,285 and the basic rate limit will be set at £31,785.
– 10% savings rate will be reduced to 0% and the band of savings income that is subject to the 0% rate will increase to £5,000. From April 2015. This means that anyone with total income of less than £15,500 per annum will no longer pay any tax on their savings income.
– Transferable tax allowance for married couples and civil partners will increase to £1,050 in April 2015.
– Simplifying the tax system; from April 2016 Class 2 NICs for the self-employed will be collected through SA
– Self -service time to pay – The government will introduce a new online system to enable people in financial difficulty to set up a payment plan for self-assessed income tax.
– The current ISA will be reformed into the new ISA (NISA), a simpler product with equal limits for cash and stocks and shares. The annual investment limit for the NISA will be £15,000 pa and will benefit more than 5 million people who currently reach their cash ISA limit, three-quarters of whom are basic rate taxpayers. The limits for the Junior ISAs and Child Trust Funds will increase to £4,000. These changes will be introduced from 1 July 2014.
– Pensioner savings bonds: NS&I will launch a choice of fixed-rate, market-leading savings bonds for people aged 65 or over, available from January 2015. Interest on the bonds will be taxed in line with all other savings income at marginal rate.
– It is expected that NS&I will launch a 1-year bond paying 2.8% gross and a 3-year bond paying 4.0% gross with an investment limit of £10,000 per bond.
There will be more flexibility for people accessing their defined contribution pension savings when they retire.
– Drawdown of pension income will be taxed at marginal income tax rates rather than the current rate of 55% for full withdrawals which means that an individual will be able to withdraw their savings at a time of their choosing subject to their marginal rate of income tax.
– The tax-free pension lump sum will continue to be available.
– Annuity purchase will no longer be obligatory.
– From 27 March 2014 the amount the minimum income threshold for flexible drawdown is reduced to £12,000.
– The capped drawdown limit will increase from 120% to 150% to allow more flexibility to those who would otherwise buy an annuity
– The size of a single pension pot that can be taken as a lump sum, will be increased from £2,000 to £10,000 and there is an increase in the number of pension pots of below £10,000 that can be taken as a lump sum from 2 to 3.
– The overall size of pension savings that can be taken as a lump sum,is increased from £18,000 to £30,000.