Change (Photo: Flickr/<a href="https://www.flickr.com/photos/oringebob/8617442811/in/photolist-e8uDwc-4oPJUQ-dhXVe4-6KsA7U-3P2MvQ-8mXMhm-7Fk9Yq-9Bgxbs-88dogq-5zawGH-5treTv-5T4iy9-csx4wd-wZ1aBW-6NFUSK-6dXUTU-4N8MVY-dcZaG7-4GYfjp-qk1LL-5Py8CH-6TCgyp-7e1XGT-BVMqnJ-b7stL4-8YENrX-6uDQp-7FSYiS-pbGA7o-5qZnJZ-iaixZ2-zHyL7N-4tDnrN-3AFPeB-9foBb6-4dn7uw-ppdYve-seJN2-qwPoUY-4F5zuW-7CuWcv-4FcUVE-m2thgF-8NAQAr-4chkWQ-9BJavZ-9SfwLJ-pKDgpr-rwcAoE-shmPZ8">B Gilmour.</a>)

Change (Photo: Flickr/B Gilmour.)

We have written a lot about the changes coming from 6th April 2016, or brought about this year; we thought it could be useful to bring them into one summary post.

Pensions

  • Lump sum death benefits – new rules from 6th April 2015 mean it is easier to leave a pension as a legacy; often free of all taxation
  • Lifetime allowance – the most tax-efficient fund that can be accumulated is falling from £1.25m to £1m (£50,000 of final salary equivalent)
  • Annual allowance – the most tax-efficient contributions will be falling for higher earners (over £150,000); all individuals will see their allowance of £50,000 for 2012/13 fall away
  • Flat rate tax relief – there is a risk that the current higher rates of tax relief (20-60%, plus national insurance in some cases) will fall. 30% is mooted and many individuals could pay in up to £180,000 before the budget on 16th March
  • Pension input periods aligned – the hideously complicated pension input periods have now been brought inline with tax-years; transitional rules mean for many individuals contributions made between 6th April 2015 and 8th July 2015 do not count towards the £180,000 above
  • Flexible withdrawals – new rules from 6th April 2015 mean more planning opportunities are available for those who want to access their pensions

Savings and investments

  • ISA allowances are frozen at £15,240, but remain a ‘use it or lose it’ opportunity for all
  • CTFs became redundant for many children with JISAs potentially more flexible, and as an ongoing structure offer more stability
  • The introduction of a £5,000 savings band means that up to £16,000 of income can be paid spread between earned and savings income
  • All interest from 6th April 2016 will be paid gross, and basic rate tax payers will gain a £1,000 tax-free allowance; this may mean ownership of cash balances need to be reviewed
  • In a measure to attack personal service companies, dividends are taxed at a potential additional 7.5% from 6th April 2016. Business owners may have little option, but individuals with invested portfolios may be better served with a ‘total return‘ strategy

Buy-to-let

Worthy of its own heading, the current government seems to have it in for landlords.

  • From 6th April 2016 an additional 3% will be paid as stamp duty land tax on most new purchases of second homes
  • Given the lack of liquidity on property assets, higher rate tax payers may want to think about paying down mortgages and/or selling properties before the removal of higher rate relief on mortgage interest
  • As detailed below the budget may see further changes – Capital Gains Tax is expressly not protected, so selling properties sooner rather than later may lead to lower rates of CGT

Inheritance Tax

  • Whilst a way off, we know that up to £1m of a couple’s estate can be passed without inheritance tax – starting from 2017. As the benefit is withdrawn for those with assets worth more than £2m, it may be wise to start planning now

The budget

Before the tax-year end we have the milestone of the budget. If you’re intending to plan, you may wish to think about using the 16th March 2016 as a deadline rather than  the tax-year end.

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