Budget 2015: Six things advisers need to know

Six things advisers need to know

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With 50 days to go to the general election, Chancellor George Osborne today delivered a Budget he said showed Britain was "the comeback country". But what did he announce? Here are the key measures of interest to professional advisers...

 

1 ISA 'freedom'

The government is to allow savers the "complete freedom" to take money out of a cash ISA and put it back in later in the year.

The reform means that, instead of being able to put up to £15,240 in the 2015-2016 tax year into an ISA in total, savers can take out their money and put it back in within the same year, without losing their ISA tax entitlement.

The only condition is that the repayment is made in the same financial year as the withdrawal.

 

2 Help to Buy - for ISAs!

Similar to its 'Help to Buy' programme for homebuyers, the government has announced that savers will be able to open an ISA, save up to £200 a month towards their first home, and the government will boost it by 25%. This is the equivalent of a £50 bonus for every £200 people save, up to £3,000.


3 Personal allowance

Much-mooted in the build-up to the Budget, Chancellor George Osborne said the tax-free personal allowance would rise to £10,800 in 2016-2017, and £11,000 the year after.

The government calculates the increases to the personal allowance - from £6,475 in 2010 to £11,000 in 2017-2018 - will save a typical taxpayer £905.

To ensure the benefit is passed on to higher rate taxpayers, the government said it would also increase above inflation the point at which higher earners start paying the 40% rate: it will increase by £315 in 2016-2017, and by £600 in 2017-18 - taking it to £43,300 in 2017-2018.

 

4 Savings allowance

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 they are a basic rate taxpayer and have a total income up to £42,700 a year, they will be eligible for the £1,000 tax-free savings allowance.

If they are a higher rate taxpayer and earn from £42,701 to £150,000, they'll be eligible for a £500 tax-free savings allowance.

 

5 Pension extension

We already knew this one: the government is to extend the pension 'freedoms' announced at last year's Budget to existing annuity holders. The change means up to five million pensioners will be given the freedom to sell their annuity for a cash lump sum

Currently, people who have bought an annuity are unable to sell it without having to pay at least 55% tax on it. From April 2016, the tax rules will change so that people who already have income from an annuity can sell that when they choose and will pay their usual rate of tax they pay on income, instead of 55%.


6 Abolished: the annual tax return

Made most of the headlines this morning, did this. Instead of the little-loved annual tax return, millions will have the information HMRC needs automatically uploaded into new digital tax accounts.

Businesses, Osborne said, will feel like they are paying a simple, single business tax. For most people, the information needed will be automatically received.

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