It was reported last year that if you had used your full ISA PEP allowance since the beginning, by then you would have saved nearly £200,000 tax-free, not including investment growth. It was also reported that some people are now sheltering more than a million in ISAs and benefit from tax-free income and growth*. This shows just how much can be gained from regular investment.
The Chancellor made ISAs more generous in July this year, with the combined NISA which is able to accept £15,000 annually in cash or stocks and shares. He added to this by announcing in the Statement that an ISA/NISA can be transferred between husband and wife, or civil partners on death. They will do this by increasing the allowance of the survivor by the amount of the spouse’s ISA on death. It is excellent news to know that a husband and wife’s tax benefits aren’t lost on death.
The stamp duty changes are also good news. Previously, as soon as a property went above a fixed value, the relevant percentage stamp duty was charged on the whole purchase amount. The new tiering system seems much fairer. For example, you now pay 2% on the value between £125,001 and £250,000 and then 5% on the amount between £250,001 and the next threshold. George Osborne said that 98% of people will pay less with this change. Some of the savings are substantial, however, others were better off under the old rules. The Government has said that anyone who exchanged contracts on or before the 3rd and completed on or after the 4th December can choose between the old and the new rates. If you are in this situation, we strongly suggest you calculate which rates benefit you most.
The Government has already announced big changes to pensions from April 2015. Pension money held in a drawdown arrangement where the pensioner dies before age 75, can then be passed on free of tax, where previously it would have been subject to 55% tax. Obviously, this may have led people towards making drawdown arrangements instead of taking an annuity where at present the benefits can be lost on death.
To bring annuities into line, the Chancellor also announced in the Autumn Statement that income from joint life annuities or guaranteed term annuities will also pass to the spouse tax-free before the age of 75. This is also fairer, so we view this as another positive step.
There were many other changes but these are the ones that affect most of our clients.
At Monetary Solutions Ltd, you can book a free initial consultation about any financial matters, so please call us on 020 8655 8488.