4 December 2014 - The Autumn statement, which was announced yesterday, reaffirming the government's commitment to put savers and investors at the heart of their election pledge, boasting of a fast growing economy, exciting new ISA rules and a change in stamp duty.
Whilst we were waiting with baited breath for an update on the consultation to allow Child Trust Funds to Junior ISA transfers this never came, but confirmed pension reforms and changes to the personal allowance gave us all lots to think about.
UK growth – “fastest growing of any major economy of the world”
Chancellor Osborne revealed the growth forecast for this year is to be revised up to 3% and the forecast for next year is also to be higher than originally predicted, at 2.4%.
While the deficit is falling, Osborne understands that it remains too high, but we are now seeing a more balanced growth, with this coalition government focussing on creating a “Northern Powerhouse”, encouraging devolution and investing in manufacturing, technology and science and supporting growth throughout the UK.
ISAs - “aspiration to save, to work, to own your own home”
ISAs are vital to the financial future of millions of UK savers and investors, and we commend yesterday's announcement by Mr Osborne. Previously, it was the case that ISAs lost their tax-free status when passing to a spouse or civil partner on death, but as of the 3rd December 2014, the spouse or civil partner will inherit their ISA tax advantages.
The surviving spouse will benefit from an additional one-off ISA allowance equal to the total amount the deceased held within their ISA at the date of death. The additional ISA allowance can be used in the tax year following the date of death.
For example, if you have £100,000 saved in your ISA, your spouse, or civil partner, will have £115,240 to invest into his or her ISA in the tax year following your death (based on the current tax year's ISA allowance). This breaks down into the £100,000 you had saved, and the £15,240 from the next tax year's tax allowance. Please note that ISA allowances may change each tax year.
This is a further reason for investors to use an ISA, which has proved an excellent vehicle for savings and investments. If you would like to invest in an ISA today, or top up an existing ISA, this can be done:
This will come as a big relief to the older generation of ISA clients who tend to take income from their ISA portfolio. The surviving spouse can now continue to enjoy this income tax free. This is even more important at a time when bank deposit rates are at record lows and finding high-yielding investments has become more difficult.
There have been countless news articles regarding the pension reforms, following the Budget last March. Yesterday, the Chancellor confirmed that the pensions “death tax” (the 55% tax on pensions handed down to family members) would be abolished.
Better still, it was also announced that if you purchase a joint life, or guaranteed annuity, and you die before the age of 75, the annuity can be passed on.
If you are interested in opening a personal pension why not complete our quick questionnaire, and we will forward you the relevant documentation and application forms.
The government is to scrap the “single slab” approach on residential property purchases, introducing a new tiered charge from today.
In the current system, buyers pay 1% in stamp duty tax on a £250,000 home, but 3% on anything over that. Going forward, the government is introducing a tiered approach:
The Chancellor explained that stamp duty will be cut for 98% of home buyers who currently pay it, as a result of the changes.
Personal allowance – “the first increase in line with inflation in five years”
The Chancellor has announced that the personal allowance threshold will be increased to £10,600 next April, £100 more than initially planned, saving working people £825 a year. By doing this, he aims to take “three and a half million of the lowest paid workers out of paying tax altogether”. He also hopes to raise the allowance to £12,500 by 2020.
This increase will also be passed on to higher rate tax payers, whose allowance will increase from £41,865 to £42,385 in April, with plans to raise the allowance to £50,000 by 2020.
Child Trust Funds
Unfortunately, there was no update on whether Child Trust Funds can be transferred to Junior ISAs come April 2015. Let's hope there is more information about this in the Budget in March.
It is clear that the government may have both eyes on next year's election, but they are also revolutionising UK pensions and investments for savers.