George Osborne’s March 2015 Budget could well be followed by another set of announcements after the election, regardless of which party(ies) form the next government. Labour would have some different ideas; the Conservatives without the Lib Dems would probably be less constrained in some of their tax ideas. Even a new coalition might have a new Chancellor wanting to make his or her mark.
Some of the key points of the Budget are:
- The new Help to Buy ISAs effectively give investors tax relief on a cash ISA investment for home buying. The government will provide a £50 bonus for every £200 of monthly savings up to a maximum of £3,000 on £12,000 of savings. The scheme is for first time home-buyers on houses worth up to £450,000 in London and £250,000 elsewhere in UK. The aim is to start the scheme from Autumn 2015.
- In another reform to the ISA regime, investors will be able to withdraw money from their ISAs and replace it without it counting towards their annual subscription limit. However, withdrawals and replacements must take place within the same tax year. The hope is that this too will be introduced this Autumn.
- People with pension annuities will be able to sell them to third parties in exchange for a cash sum or an alternative retirement product from April 2016.
- The bad news for pensions is that the government also intends to cut the Lifetime Allowance again; this time the reduction is from £1.25 million to £1 million. The reduction will take effect from 6 April 2016 and will see further transitional protection introduced.
- A number of measures announced in the Budget aim to simplify the tax system, including major changes to tax returns. A helpful announcement for self-employed people is the proposed abolition of class 2 national insurance contributions – sometime in the next parliament.
- From April 2016, there will be a new tax free Personal Savings Allowance. Up to the first £1,000 of a basic rate taxpayer’s savings income will be tax free each year. Higher rate tax payers will have a tax free allowance of £500 a year. Additional rate taxpayers will not receive an allowance.
- The period over which farmers can average their profits for income tax will be extended from two years to five years, with effect from April 2016.
- As usual, there are many announcements aimed at countering tax avoidance and evasion.
- Finally, duties have been held on fuel and wine. Beer drinkers are 1p better off per pint, with cider and whisky drinkers benefiting from a 2% cut in duty.