GEORGE Osborne’s Budget is a boon for savers, but the news for pensioners is more mixed, writes Lynn Hunter
While there were no major ‘rabbits out of the hat’ for the voting electorate, George Osborne has proposed a series of new measures designed to help savers suffering from the impact of record low interest rates.
The raising of the Personal Allowance for Income Tax coupled with the introduction of a new £1,000 annual Personal Savings Allowance means good news for those paying tax on what are already very low cash investment returns. Even higher rate tax paying savers will benefit from the increase in the starting point for 40 per cent tax.
Following on from increased flexibility offered to those using ISAs as their savings vehicles made in previous announcements, the Chancellor went further in announcing a consultation on allowing flexible access to savers who wish to withdraw funds from their ISAs and but put the funds back later in the tax year. This, coupled with a review designed to widen the range of investments that can be held in an ISA, will no doubt be welcomed by those who have already built up substantial ISA savings.
There was good news too for prospective first time buyers with the announcement of a new “Help to Buy” ISA where the Government will top up the savings of those looking to build up a deposit for their first home.
Millions of pensioners who committed to buying annuities prior to the announcement of the pension freedoms made last year will greet the proposal of a consultation on extending these freedoms to existing annuities. It remains to be seen however exactly how this will work in practice and the level of regulation and advice that will be needed to ensure that pensioners do not give up the important guarantees associated with their existing arrangements.
While the annual amount that can be saved into pensions remains unchanged, the proposal to further cut the overall Lifetime Allowance on pension savings yet again from £1.25 million to £1 million will be less welcome for those saving for their retirement. This will cause even more pension scheme members to review their current level of pension savings and the potential impact of 55 per cent tax on any excess funds which might accrue.
There was perhaps one headline-grabbing announcement - the abolition of the tax return, with new real-time digital tax accounts set to replace end of year tax returns by 2020. This could be viewed as one small step for man, but one giant leap for HMRC and taxpayers. Given that most taxpayers file returns online already, it’s unclear exactly how these new digital tax accounts will operate. Accountants and tax professionals will be very keen to establish whether this signals the end of the January rush, or whether the new system will retain some form of January deadline to keep us on our toes!
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