• Pensions

    Pensions+

    Whether you're saving for retirement or you are facing decisions at retirement, we can help

    View more
  • Savings Planning

    Savings+Planning

    Saving for the future is important and we can help you select the right product to achieve your goals

    View more
  • Mortgage Advice

    Mortgage+Advice

    We are specialists in arranging mortgages for First Time Buyers, people moving home, 'Buy to Let' mortgages and remortgages.

    View more
  • Investment Advice

    Investment+Advice

    Make the most of your money and don't leave it languishing in Building Society accounts

    View more
  • Equity Release

    Equity+Release

    Allows you to access cash tied up in your home - speak to one of our qualified advisers

    View more
  • Protect Insure

    Protect+Insure

    We can shop around for the lowest cost life cover, income protection and critical illness cover

    View more
 

Autumn Statement - what it means for you

There were no surprises in George Osborne's Autumn Statement to match the seismic pension changes in his last Budget. However, he did pull one rabbit out of the hat for savers in the shape of new inheritability of ISAs for married couples. He also confirmed how pension wealth can be cascaded down the generations.

ISA inheritability
ISA savers will benefit from two positive changes:

  • The annual allowance will increase to £15,240 from £15,000 from April 2015. There was NO mention of a lifetime cap for savers.
  • From today, spouses and civil partners will be able to inherit their deceased partner's ISA fund and retain the tax advantages of the wrapper. There will be no impact on the spouse's/civil partner's own ISA annual allowance.

ISA accounts left to a spouse or civil partner will of course continue to pass IHT free as before - the transfer itself being covered by the spousal exemption. The big difference is that the continuing returns on a deceased partner's savings will be tax free.

The combined value of a surviving partner's ISA account will ultimately be included in their own estate for IHT. Those near to or already over age 55 may want to consider moving these savings into a pension, potentially allowing the pension fund to be passed on to their children and grandchildren tax free.

Pension freedoms confirmed
Today's confirmation of the new DC pension death benefit regime puts the final icing on the cake for next April's world of ‘freedom & choice'.

  • On death before 75, any death benefit will be paid tax free within the Lifetime Allowance (LTA). In a change from the original proposals, this will now apply to survivors' annuities and pension guarantee payments as well as inherited drawdown pots.
  • On death at 75+, death benefits will be taxed as the recipient's income, when they draw the funds. For 2015/16 only, non-drawdown lump sums will be taxed at a flat rate of 45% - but income tax will apply to all post-75 death benefits from 2016/17 onwards.
  • The old tax distinction between crystallised and uncrystallised pots is gone. Within the LTA, the sole determinant of tax treatment will be the deceased's age at death.
  • Any individual beneficiary of a flexible pension can choose to keep their inherited pension pot in the drawdown wrapper and decide when (or if) they draw down on it.

On the flip side, as widely expected, those accessing the new freedoms will pay the price of a reduced £10k ‘money purchase' Annual Allowance and no future carry forward.

  • This sends a clear message to maximise pension funding before accessing the new flexibility.
  • And the exemptions for existing capped drawdown users, and those only drawing tax-free cash after April, position advice as the map to navigate this tax minefield to keep options open.

Other pension news

  • State pensions: The new single-tier State pension from April 2016 will be at least £151.25, with the final figure being confirmed next Autumn. Meantime, the Basic State pension will be increased by 2.5% (to £115.95 for a single person) from April 2015 under the ‘triple-lock' guarantee.
  • Age 75: Following informal consultation, there will be no change to the 75 upper age limit for tax relief on pension contributions by individuals.
  • Means-testing: Fears that the new pension flexibility could lead to a lifetime's pension savings being deemed immediately available in means-testing assessments have been quashed. Assessments will be based on the annuity income the pot could provide, with higher income only being assessed if it's actually taken from the pot.

U-turn on IHT settlement nil rate bands
The Government has confirmed that it has scrapped plans to introduce the IHT settlement nil rate band and replace it with new rules to be announced in next week's Finance Bill. The replacement rules will still seek to prevent tax avoidance through the use of multiple trusts.

The settlement nil rate band rules would have seen each settlor have just one nil rate band which they could allocate across all relevant property trusts that they've created. Trusts created before 7 June 2014 would have remained subject to the old relevant property rules, leaving two sets of complex rules operating in parallel.

The result could have saddled clients with trusts where the purpose is to accept the payment of death benefits, such as from life assurance contracts and pensions, with the burden of tax compliance and reporting, even where no inheritance tax is due.

We await the detail in the Finance Bill and hope that it delivers on the promise of simplifying the taxation of trusts and IHT.

Income tax
Minor changes were made to allowances and thresholds for the new tax year:

  • The personal allowance will rise to £10,600 in 2015/16 for those born after 5 April 1938. This is an additional £100 on what had been previously announced. At the same time, the level at which income tax becomes payable at higher rates will rise in line with inflation to £42,385 (from £41,865), meaning that higher rate taxpayers with incomes below £100,000 will also be better off by £224 - a little less pressure on the ‘squeezed middles'.
  • Age related allowances will remain at £10,660 for those born before 6 April 1938.
  • From the 2015/16 tax year, a spouse or civil partner who doesn't have income to fully use up their personal allowance will be able to transfer up to £1,060 to their partner, provided that the partner is a basic rate taxpayer.

More charges, less choice for the non-domiciled
The charge to use the non-domicile basis of taxation is increasing.

Non-domiciles who choose to use the remittance basis and have been resident for at least 7 of the past 9 years, currently pay a charge of £30,000.

This will increase to £60,000 (from £50,000 in 2014/15) once they've been resident for 12 out of 14 years.

And a new charge of £90,000 will be brought in for those who've been resident 17 of the last 20 years in the UK.

The Government will also consult on making the choice to pay the remittance basis charge stick for a minimum of 3 years, so that non-domiciles are not easily able to chop and change the basis on which they're taxed.

Non-domiciles' taxation remains in the spotlight and this is unlikely to change. As offshore bonds are not taxed until a chargeable gain arises, they may offer another way for non-domiciled individuals to control when and how they pay their tax.

 

Source: Standard Life

Sam: 4th Dec 2014 15:28:00

 

Latest News

Shift from annuities to drawdown continues
Shift from annuities to drawdown continues

Read More >>

Base rate rise could cost variable borrowers £83m
Base rate rise could cost variable borrowers £83m

Read More >>

It costs £10,830 a year to be a pensioner
It costs £10,830 a year to be a pensioner

Read More >>

Buy-to-let market pauses for breath amid new rules
Buy-to-let market pauses for breath amid new rules

Read More >>

Remortgage and beat the base rate rise
Remortgage and beat the base rate rise

Read More >>

See all News...
  • Pensions

    Pensions+

    Whether you're saving for retirement or you are facing decisions at retirement, we can help

    View more
  • Savings Planning

    Savings+Planning

    Saving for the future is important and we can help you select the right product to achieve your goals

    View more
  • Mortgage Advice

    Mortgage+Advice

    We are specialists in arranging mortgages for First Time Buyers, people moving home, 'Buy to Let' mortgages and remortgages.

    View more
  • Investment Advice

    Investment+Advice

    Make the most of your money and don't leave it languishing in Building Society accounts

    View more
  • Equity Release

    Equity+Release

    Allows you to access cash tied up in your home - speak to one of our qualified advisers

    View more
  • Protect Insure

    Protect+Insure

    We can shop around for the lowest cost life cover, income protection and critical illness cover

    View more