The new Government announced their first budget on 8 July, which included many interesting changes from a financial adviser’s viewpoint. The main issues are summarised below, but due to the complexity we recommend you contact us if you’d like any clarification.
The main item hitting the headlines is an increase in inheritance tax relief up to £1 million for married couples or civil partners who pass on a property to their children or grandchildren. The extra benefit (added to the existing £325K) starts in 2017/18 at £100K per person, and goes up to £175K by 2020/21. You will still get this allowance even if you downsize or cease to own your home after 7 July 2015.
Legislation will lock in income tax, national insurance and VAT at 2015/16 rates, so they cannot go up during this Government term. The annual income tax allowance will go up to £11,000 next year, and will eventually reach £12,500. You can also earn £42,000 before paying any tax at 40%.
The lifetime pensions allowance has been cut again and now stands at £1 million. Additional rate taxpayers will have their annual contribution allowance of £40K tapered by £1 for every £2 earned above £150K, down to a minimum allowance of £10K.
Dividend tax credits have been abolished. The personal rates of tax on dividends have increased by 7.5% across all the different tax bands, where dividend income exceeds a new tax-free allowance of £5,000.
As already announced in March, from April 2016 there will no longer be 20% tax deducted at source from savings. Basic rate taxpayers will have a new savings tax allowance of £1,000 (£500 for higher rate taxpayers and £0 for additional rate taxpayers).
There have also been significant changes to benefits and minimum pay levels which there is no room to include here. For further details, please get in touch.
At Monetary Solutions Ltd, you can book a free initial consultation about any financial matters, so please call us on 020 8655 8488.
Vivian Slattery Director, Monetary Solutions Ltd