Listening to the radio on the way into the office this morning, I was a little bit surprised to hear that tax returns were potentially going to be abolished. Once I’d clarified the Arsenal result with our Arsenal supporting tax advisers… I tuned into the speculation the team were discussing about digital filing of tax data. The Chancellor’s speech did little to clear up the mystery. However, the lunch-time reporting gave a more accurate picture, announcing that end of year paper returns would be scrapped in favour of real-time online accounts by 2020. Whilst the average employee with a small amount of savings may have known that HMRC already held all the necessary information to work out their tax bill, the idea of having a personal account with HMRC will not necessarily be attractive to all. By 2020 we are told, the accounting software of a business will be able to feed data straight to their digital account with HMRC, and both individuals and businesses will have the option to ‘pay as you go’.
There was some concern as the budget approached that the Chancellor might raise capital gains tax rates for individuals or chip away at the Entrepreneur’s Relief (ER) which reduces chargeable Gains Tax on a disposal of business assets to 10% from the standard 18% or 28%. However, other than the closure of a couple of loopholes, the relief remains intact. Following the Autumn statement when it was announced that ER would not be available for gains on goodwill when a business incorporated, there was concern that this would adversely affect individuals who were retiring at the time of incorporation. The rules have now been clarified to confirm that partners who do not acquire a stake in the successor company can still benefit from ER on the disposal of their share in the business.
The Chancellor announced a new personal savings allowance which will be introduced from 6/4/16. For a basic rate tax payer, this will mean that they can receive up to £1,000 interest income and pay no tax on it. For higher rate tax payers the allowance will be £500 and there will be no allowance for additional rate payers. On top of this, greater flexibility was announced in respect of ISAs, allowing savers to withdraw funds and repay them within the year without affecting their annual subscription limit. This is planned for introduction in Autumn this year.
To help first time buyers, there will be a new Help to Buy ISA. This can be opened with an initial deposit of up to £1,000 and then you can save up to £200 a month. When you buy your first home in the UK, HMRC will add a bonus of 25% to your savings up to a maximum bonus of £3,000.
When the new pension freedom was announced in last year’s budget, the Chancellor made it clear that people who had already purchased an annuity had effectively missed the boat. However in today’s budget, legislation is promised from April 2016 which will allow people who are already receiving income from an annuity to assign that income to a third party in return for a lump sum. Whilst this will extend pension flexibility to a wider group of people, it will not undo the ‘damage’ suffered by a pensioner who was obliged to buy a product when the annuity rates were low. The low level of income they are assigning is unlikely to bring them a large lump sum and as always there will be significant fees to pay and possible tax implications.
And finally…..there’s a penny off every pint!!
I would be pleased to speak to anyone to clarify how this budget will affect them and also to confirm if their affairs are organised as efficiently as possible! Please don’t hesitate to contact me on 01522 531341 or firstname.lastname@example.org