Autumn Statement issues regarding annuities and ISAs explained
As well as a raft of announcements about economic growth predictions, deficit reduction targets and infrastructure projects, the Government’s December 2014 Autumn Statement contained a number of announcements relevant to personal financial planning.
April 2015 really will bring about something of a pensions revolution. The latest announcement from the Chancellor of the Exchequer, George Osborne MP, was that annuities will be able to be passed on to beneficiaries tax free if the planholder dies before age 75. This brings annuities into line with previous announcements on income drawdown.
Spouses and civil partners will be able to inherit their partner’s Individual Savings Account (ISA) on death, and retain the contract’s tax advantages. The surviving partner’s ISA allowance in the tax year in which the death occurs will remain unchanged, so someone inheriting a £20,000 ISA can still use their own allowance of £15,000 on top of this. Anyone whose spouse died on or after the day of the Statement can benefit from the change.
The ISA allowance will also rise to £15,240 for the 2015/16 tax year.
Most homebuyers will be cheered by the radical changes to stamp duty. The present system involves a homebuyer paying a percentage of the entire property price in duty, known as a ‘slab’ system. This means that a £230,000 home will attract duty at 1%, i.e. £2,300; while a £270,000 home is taxed at 3%, i.e. £8,100. The new system will involve a system of graduated tax bands, similar to the income tax regime.
According to Mr Osborne, 98% of UK properties will attract less duty under the new system. The exceptions are properties valued at £937,500 or above (apart from those between £1 million and £1,250,000). The new bands are:
- The first £125,000 will attract no duty
- The portion between £125,001 and £250,000 will be taxed at 2%
- The portion between £250,000 and £925,000 will be taxed at 5%
- The portion between £925,001 and £1.5 million will be taxed at 10%
- The portion in excess of £1.5 million will be taxed at 12%
This means that a £270,000 home will have duty of £3,500.
It is reported however that these stamp duty thresholds are likely to remain frozen for five years, meaning that duty will rise if house prices rise.
The personal income tax allowance (the amount on which no tax is paid) will rise to £10,600, while the higher rate threshold will increase to £42,385.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.