Life after the Budget
Some of the areas affected by the budget include:
- The personal income tax allowance has been raised to £10,000 and the basic rate income tax band for 2014/15 has been reduced by £145, from £32,010 to £31,865 with the threshold for moving into the Additional Rate remaining the same.
- For those saving into ISAs, the limit has been increased to £15,000 from 1 July 2014. The amount that can be placed in a cash and share ISA will be the same.
There are hints at radical changes to the pension regime with a proposal to abolish the requirement to buy an annuity from April 2015 and individuals given more freedom to access and operate their entire pension fund as they choose. The changes, which will be finalised in the 2014 Finance Bill, will introduce a welcome shift towards greater flexibility for pension savers.
Individuals can look forward to wide ranging measures which include:
- The minimum income threshold is to be reduced from £20,000 to £12,000 from 27 March 2014 to April 2015 so if an individual meets the minimum income threshold, there is no limit to how much of their personal pension pot they can take each year as drawdown.
- For those with small pension pots an increase is to be made to the current limit that can be taken as a lump sum; this will rise from £18,000 to £30,000, allowing members over 60, with total pension savings of less than £30,000 to take out the total savings as one or more trivial commutation lump sum - part of which may be taxable.
- Tax on pension amounts taken as a lump sum over the 25% tax-free entitlement will be charged at the normal marginal tax rates rather than at 55% from April 2015.
- Compulsory annuities are to be discarded altogether.
Transferable tax allowances for married couples were also included in the announcement with the 2014 Finance Bill to introduce legislation that will allow married couples from 2015-16 to transfer up to £1,050 to their spouse or civil partner as long as neither partner is a higher or additional rate tax payer and the couple are not entitled to claim married couples allowance (which applies where one spouse was born before 6 April 1935).
These are changing times and our experts at Royds have a wealth of experience in assisting clients to put the appropriate plans in place to make provisions for their future, and that of their family, helping them protect their estates and their chosen beneficiaries through their financial affairs.