Budget 2015 highlights

1. Cash in annuities

From April 2016, people who already have an annuity will be able to now 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 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%.

Expert's verdict: Steve Groves, Chief Executive Officer of Partnership said: "The creation of a well-regulated carefully-designed secondhand annuity market could mean that peoples annuities are now more flexible, still guaranteeing an income for life but also able to provide some extra cash when it is needed. It will provide those five million older people who have already taken an annuity with a greater degree of flexibility.
“Admittedly, the devil is in the detail and its now falls to the Government and industry to create a safe market which provides real value to consumers,” he adds.

2. Lifetime allowance for pension savings reduced

Every individual has a set level of benefits they can draw from pension schemes in their lifetime without triggering certain tax charges. This measure is referred to as the Lifetime Allowance. This will reduce from £1.25 million in 2014-2015 to £1 million in 2016-17 but will be indexed from 2018.  

Expert's verdict: Huw Evans, Director General, Association of British Insurers said: "Pension providers support reform of pension tax relief but three piecemeal cuts to the current system in five years is the wrong way to go about it. We need a fundamental review of the whole system to make it fairer and to deliver long-term stability for people doing the right thing by saving for their retirement."

3. ISAs to be more flexible

Individual Savings Accounts are being reformed so that instead of being able to put up to £15,240 in the 2015-16 tax year into an ISA in total, people can take out their money and put it back in within the same year, without losing their ISA tax benefits - as long as the repayment is made in the same financial year as the withdrawal.

Expert's verdict: “On the face of it the flexibility to take out money in the same tax year, without losing the tax free status of their savings, looks like a big win," says Maike Currie at Fidelity Personal Investing. "However, unless you were using your full  ISA allowance each year, this new found flexibility will make very little difference to you as you will still have some of your ISA allowance left to use. ”

4. New Help to Buy ISA

People 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%. So a £50 bonus for every £200 people save, up to £3000.

Expert's verdict:  Maike Currie at Fidelity Personal Investing said: "There are far too many questions: what if you don’t buy a property with these savings - will you lose the government top-up, can anyone contribute into such an ISA, how many of these ISAs can one family hold?  Moreover, the challenge of getting a foot on the property ladder is largely an issue of supply and demand – there are more first-time buyers, than homes. Boosting their savings is a noble cause but that won’t solve the housing shortage problem.”

5. New personal 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. The Chancellor says this will take 95% of taxpayers out of savings tax altogether.

So, if you are a basic rate taxpayer and have a total income up to £42,700 a year, you will be eligible for the £1,000 tax-free savings allowance. If you're a higher-rate taxpayer and earn from £42,701 to £150,000, you’ll be eligible for a £500 tax-free savings allowance.

Expert's verdict: Danny Cox at Hargreaves Lansdown said: "A tax cut on already miserably low interest rates is no big giveaway but welcome nonetheless. Despite this, savers should not turn their backs on cash ISAs - the tax benefits of ISA build over time - and basic-rate taxpayers could get dragged into paying higher-rate tax band and tax on their savings in the future."

6. Tax-free personal allowance increase

The tax-free personal allowance – the amount people earn before they have to start paying tax – will rise to £10,800 in 2016-17, and £11,000 the year after. The increases to the personal allowance from £6,475 in 2010, to £11,000 in 2017-18 will save a typical taxpayer £905.

To make sure the full benefits of the personal allowance increase are passed on to higher-rate taxpayers, the Government will also increase above inflation the point above at which higher earners start paying 40% tax. It will increase by £315 in 2016-17, and by £600 in 2017-18 - taking it to £43,300 in 2017-18.

7. Abolish annual tax return

Millions of people will have the information HMRC needs automatically uploaded into new digital tax accounts. The Chancellor says businesses will feel like they are paying a simple, single business tax – and again, for most, the information needed will be automatically received.

Expert's verdict: Judith Donovan, Chair of the Keep Me Posted campaign, said: We welcome the fact that British tax-payers will still have the option to complete a paper self-assessment return. Many people like the protection offered by paper tax returns, particularly in light of revelations last year that five million British workers may have had their tax bills incorrectly calculated.

“Whilst this move is a further indication of the Government’s ambitions for public services to be ‘digital-by-default’, we are pleased the change takes into account the views of the millions of workers who choose not to manage their affairs online. We look forward to seeing further detail about how this choice will be protected.”

8. Fuel duty frozen

The fuel duty increase scheduled for September has been cancelled, saving a typical motorist a total of £675 by the end of 2015-16. By the end of 2015-16 fuel duty will have been frozen for five years, resulting in the longest duty freeze in over 20 years.

9. Penny off a pint

There will be another penny off a pint, a 2% cut for spirits and most ciders, and a freeze on duty on wine.

Other key points:

  • Church repair fund to be more than trebled
  • Charities will be able to claim more gift aid on small donations
  • Investment in faster broadband and better mobile networks
  • Introduction of post-graduate research loans
  • New investment for London transport projects
  • Toll rates reduced for Severn crossing
  • £7bn transport investment for South West
  • £25m to help veterans including nuclear test veterans
  • Funds for new helicopters for Essex & Herts, East Anglian, Welsh & Scottish air ambulances
  • Plans to bring ultra-fast broadband to UK homes
  • Measures to tackle tax evasion and avoidance

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