Archive for April, 2015

Pension’s flexibility a word of caution

Tuesday, April 7th, 2015

The new flexibility, that certain pension pot holders can avail themselves from 6 April 2015, offers more opportunity regarding the funds they have saved. Once you reach minimum pension age, normally 55, you will be able to:

  • leave your pension fund invested, no change; 
  • enter drawdown, thereby taking some of your money whilst leaving the rest where it is; 
  • withdraw cash in one or a number of lump sums; 
  • purchase an annuity; 
  • go with a combination of all of the above; 
  • or take your entire pension pot in one go. 

Additionally, from April 2016, people who already have an annuity will be able to effectively sell it on, so that they too can benefit from the pension freedoms announced at last year’s Budget.

Currently, people who have bought an annuity are unable to sell it without having to pay at least 55% tax on the proceeds of the sale. 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%.

With so many options to choose from, and a variety of tax traps to avoid, there has never been a more compelling time to seek professional advice BEFORE you make any decisions.

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Savings boost

Tuesday, April 7th, 2015

There were a number of changes to promote savings in the Budget. The main changes are set out below:

  • Help to Buy ISA

From autumn 2015, a new ISA is being launched that will enable first time buyers to save for their deposit. An initial deposit of £1,000 is allowed with additional monthly savings of up to £200.

The Government will top up these savings by 25% up to a maximum of £3,000 (when deposits by the saver reach £12,000).

The bonus can only be put towards a first time buy of up to £450,000 in London or £250,000 elsewhere.

  • ISA flexibility

 From autumn 2015, ISA savers will be able to withdraw and replace money from their ISAs without using up their ISA subscription limit.

  • Personal savings allowance

From April 2016, basic rate taxpayers will not have to pay tax on the first £1,000 of interest received on savings, and higher rate (40%) taxpayers will not have to pay tax on the first £500 of interest received. The allowance will not be available to additional rate (45%) income taxpayers.

  • Premium Bonds investment limit

This limit is increased from £30,000 to £50,000 on 1 June 2015.

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Goodbye tax returns, hello digital accounts

Tuesday, April 7th, 2015

In an effort to streamline and simplify the administration of the Self Assessment tax system HMRC is planning to open digital accounts for fifty million taxpayers by 2020. When completed, these taxpayers will no longer be required to submit Self Assessment tax returns to HMRC.

Instead, HMRC will gather information from employers, pension providers, banks and building societies, and automatically post data regarding salaries, benefits, pensions and investment income to the digital accounts.

It is still not clear how information regarding property income, capital gains, business profits and other chargeable income or gains will be gathered by HMRC, although it has been mooted that it will be possible to link business accounting software with the digital accounts by 2020.

This is a radical shift from the present “gathering and filing” processes that presently places the responsibility for the make-up and lodgement of Self Assessment data on the taxpayer. In some respects it harks back to the days prior to Self Assessment when HMRC used to issue assessments to taxpayers, who were then obliged to check the numbers.

 Information published so far by HMRC indicates that:

  • Taxpayers, and their agents, will be able to access their digital accounts to make real time changes to data and pay their tax.
  • Fifteen million taxpayers will be set up with digital accounts as early as 2016 with the remainder given access to their digital accounts by 2020.

 More details are needed in order to assess the impact of these changes and HMRC have advised they will publish this later this year.

It will be interesting to see how the change will impact associated issues such as late filing penalties. Hopefully, HMRC will abandon these charges for taxpayers where little or no tax is due.

The Government will also need to consider digital exclusion: how are they going to accommodate taxpayers who cannot easily access the internet for various reasons?

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Some of the Budget changes March 2015

Thursday, April 2nd, 2015

Following last week’s Budget, the government has published the Finance Bill 2015. The bill implements tax changes announced at Budget 2014, Autumn Statement 2014 and Budget 2015.

It includes action by the government to support hardworking families keep more of their hard-earned money by:

  • increasing the personal allowance by an extra £400 to £11,000 from April 2017 so that a typical rate taxpayer will be £905 better off compared to 2010, and an individual on the National Minimum Wage working up to 30 hours a week will not pay any income tax
  • exempting children from Air Passenger Duty so that, taken together with measures introduced in Finance Act 2014, a family of four flying to Australia will save £194

The bill also contains key policies to make the UK more competitive for business, such as:

  • supporting investment in the crucial UK oil and gas industry through cutting the Supplementary Charge by 12%, cutting the Petroleum Revenue Tax from 50% to 35% and introducing two new allowances
  • increasing the tax credits available for large and small businesses investing in research and development
  • a new tax relief to promote the production of children’s TV in the UK, and further support for high-end TV and film tax.

Finally, the bill legislates to create a fairer tax system, by clamping down on tax avoidance and ensuring that banks contribute their fair share. This includes:

  • introducing a new Diverted Profits Tax of 25%, aimed at multi-national companies that artificially shift their profits offshore to avoid paying UK tax
  • putting a stop to unfair tax avoidance – raising nearly £2.5 billion by 2019/20 to support the economic recovery
  • increasing the bank levy and introducing new rules for banks – raising nearly £8 billion over the next 5 years

David Gauke, Financial Secretary to the Treasury, said:

The government is committed to supporting hardworking families and backing business. That is why we are making it easier for them to keep more of their hard earned money and access the help they need to grow.

The legislation published today builds on our efforts to create a stable tax system that supports our long-term economic plan.”

The measures contained in the bill were announced by the Chancellor at Budget 2014, Autumn Statement 2014 or Budget 2015.

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