Which of these could impact on your financial plans, both positively and negatively?
In his final Budget speech to parliament on 18 March, the Chancellor of the Exchequer, George
Osborne, announced Britain was ‘walking tall again’ after five years of austerity.
We’ve provided our summary of the 10 key announcements that could impact on your personal financial plans, both positively and negatively.
1. The tax-free personal allowance set to increase in April 2017, to £11,000
The tax-free personal allowance – the amount people earn before they have to start paying tax – will rise to £10,800 in 2016/17 and £11,000 the year after.
The increases to the personal allowance from £6,475 in 2010 to £11,000 in 2017/18 will save a typical taxpayer £905.
To make sure the full benefits of the personal allowance increase are passed on to higher-rate taxpayers, the Government is also increasing above inflation the point above at which higher earners start paying 40% tax. It will increase by £315 in 2016/17 and by £600 in 2017/18 – taking it to £43,300 in 2017/18.
2. New Personal Savings Allowance will take 95% of taxpayers out of savings tax altogether
From April 2016, a tax-free allowance of £1,000 (or £500 for higher-rate taxpayers) will be introduced for the interest that people earn on savings.
If you are a basic-rate taxpayer and have a total income up to £42,700 a year, you will be eligible for the £1,000 tax-free savings allowance.
If you are a higher-rate taxpayer and earn from £42,701 to £150,000, you’ll be eligible for a £500 tax-free savings allowance.
3. Introducing the Help to Buy ISA – every £200 people save towards their first home, the Government will put in an extra £50, up to a maximum bonus of £3,000
Following the introduction of Help to Buy, which allows people to purchase a home with just a 5% deposit, the Government will help first-time buyers save for a deposit with the introduction of the Help to Buy Individual Savings Account (ISA).
People will be able to open an ISA and save up to £200 a month towards their first home, and the Government will add a further 25%. That equates to a £50 bonus for every £200 people save, up to maximum of £3,000.
Help to Buy ISAs will only be available to individuals who are 16 and over and will be limited to one per person. If appropriate, consider buying together to receive a bonus each.
4. People will have complete freedom to take money out of an ISA and put it back in later in the year
Savers will have the flexibility to be able to take money out of their ISAs and put it back in the same financial year without it counting towards the annual tax-efficient ISA allowance.
Currently, the ISA allowance is £15,240 (2015/16), and once you’ve deposited that amount, you can’t put any more in during the same tax year, even if you make a withdrawal.
The changes, which will come into effect from autumn 2015, will mean that savers who need access to their ISA savings are not penalised if they then want to save more later on that tax year.
The only limit is that you need to top up your ISA during the same financial year the withdrawal was made – if you don’t, it will count towards your new tax-efficient ISA allowance.
5. Additional funding to support the new pension freedoms and the new pensions guidance service
The Budget document stated: ‘Additional funding of £19.5m in 2015/16 will be provided to support the new pensions freedom and the new pensions guidance service, Pension Wise. This funding will extend the availability of State Pension statement and pension tracing services.’
The next 5 key announcements are available to download as a simple fact sheet. If you haven’t already please subscribe to our newsletter to download the fact sheet pdf.
Are your financial plans still on track after Budget 2015?
If you would like to review your current situation to ensure that your plans are still on track, please call us on 028 2544 6120 or use the contact form by clicking here.
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. Although endeavours have been made to provide accurate and timely information, Goldmine Media cannot guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions.
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