Rickard Keen


Rickard Keen Financial Services – Budget Special Newsletter, April 2015

Personal savings: Help getting onto the property ladder and more flexible ISAs

The Chancellor announced two main changes to savings in the last budget before the General Election, both linked to ISAs.

Firstly, regulations will be introduced in Autumn 2015 to make ISAs more flexible which will mean that savers can withdraw money from their ISA in the year of subscription and replace this without losing their limit for the year.

Secondly a new ‘Help to Buy’ ISA is to be introduced to assist those saving to purchase their first home. For every £200 (being the maximum monthly deposit) a first-time buyer saves, the government will provide a £50 bonus, up to a maximum of £3,000 for those who save £12,000.

The Chancellor also confirmed a new Personal Savings Allowance, so that the first £1,000 of savings is tax-free for basic rate taxpayers (first £500 for higher rate taxpayers), which he announced would take 95 per cent of taxpayers out of savings tax altogether.

Keith French of RKFS said: “Tax on savings has always been a bit of a sore point for most savers, who have already had to pay some degree of tax on the money they earn. Which is why the Chancellor’s announcement of a new personal savings allowance, which will enable the first £1,000 of the interest earned on all savings (£500 for higher rate tax payers) to be completely tax-free, will be welcomed by most individuals.

“During his speech George Osborne said that the move would effectively make 95 per cent of people’s annual savings tax-free. On top of this he also announced that the annual limit for tax-free ISA’s would be increased to £15,240 in the next two weeks and that access to ISA accounts would be made more flexible in future so that savers can deposit and withdraw money as and when it is needed, without losing the account its tax-free status.”

Personal Tax: No income tax, now guaranteed – for millions more lower paid workers

27 million people will benefit from the increase to £10,800 from April 2016 and a rise again in April 2017 to £11,000. The increase is said to lift four million of the lowest paid workers out of income tax. The level at which the higher rate of tax becomes liable is also set to increase to £42,700 in April 2016 and then increase to £43,300 from April 2017.

George Osborne is also abolishing the annual self-assessment tax return, in favour of digital tax accounts. The move should see more information being ‘pre-entered’ onto the HMRC system and potentially remove the need for the most simple cases to complete the annual form altogether. Details of the new digital tax accounts will be released later this year with these being started to be implemented during the next parliament.

We do not believe that the transition will happen as quickly or as smoothly as HMRC would like to think!

Pensions: People will be free to leave existing annuities

As was widely predicted, rules which trap pensioners with existing annuities in unattractive deals will be abolished

The law will be changed from April 2016, to allow the five million pensioners who have already bought an annuity to sell it, or move their money into another asset, offering a better return on their lifetime savings.

Mr Osborne also announced the reduction of the pension lifetime allowance from £1.25 million to £1 million from April 2016 and indexing it by inflation from 2018. Transitional protection for pension rights already over £1 million will be introduced alongside this reduction. He did, however, decide against reducing the pensions annual allowance which will remain at £40,000.

Keith French of RKFS said: “This Budget will be widely welcomed by those who have bought an annuity, after the Chancellor announced that more than five million people with a scheme would be able to cash them out without being heavily penalised.

“This change is yet another positive move with regards to the taxation of pensions. The announcement comes just weeks before the quite significant changes announced in last year’s Budget apply. We have prepared a summary of the changes applying from 6 April 2015, which can be found here.”

“There will soon be much greater flexibility in how a person’s pension fund can be accessed. With greater flexibility comes greater complexity, we would therefore encourage our clients to speak to us with any questions they have on the pension changes.”

Inheritance Tax: Threshold remains unchanged despite press speculation

The change announced in the Autumn Statement of the extension of the inheritance tax exemption for military service personnel killed on active service to emergency service personnel and humanitarian aid workers has now been legislated and applies to all deaths on or after 19 March 2014.

The only mention of inheritance tax during the Chancellor’s speech was “that we will conduct a review on the avoidance of inheritance tax through the use of Deeds of Variation. It will report by the autumn.”

No further mention is made of this is in the related press releases but if the use of Deeds of Variation is to be curtailed or stopped completely it will make it even more important for individuals to plan their estates and ensure wills are kept up to date.

Rest assured that Rickard Keen Financial Services will make their views known during any consultation.

Keith French of RKFS said: “The mention during the Chancellor’s speech of a review of the use of Deeds of Variation (under the guise of anti-avoidance) was interestingly not covered in any of the supporting press releases. I would expect a period of consultation and Rickard Keen will be making representations.

“In addition, there is still no uplift in either the nil rate band or annual gifts limits, meaning more estates are continuing to fall into the inheritance tax net.”

VAT & Corporation Tax: relatively few changes

There were relatively few announcements in these areas, although the Chancellor did mention the reduction in corporation tax to 20 per cent which applies from 1 April 2015.

The VAT Registration threshold increases to £82,000 from 1 April 2015, the de-registration threshold increases to £80,000. All existing VAT rates remain unchanged.



© Rickard Keen Financial Services.
Rickard Keen Financial Services Ltd. is an appointed representative of French & Associates Ltd. which is authorised and regulated by the Financial Conduct Authority.

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