HELP TO BUY ISA’s

The Chancellor has announced that their Help to Buy ISA will be available from the 1st of

December 2015. This can enable First Time Buyers to obtain a Government bonus of up to £3000

if they save up to £12,000 in the Help to Buy ISA. Note: the level of contribution will be limited to a £1000 one-off donation initially and then a maximum of £200 per month thereafter.

THE COST OF DYING – INHERITANCE TAX

The concept that a Government should be able to tax people when they die goes back many centuries as even Julius Caesar had a form of death tax.

However, it really surfaced in the UK in 1796 when “death taxes” were used to finance the war against Napoleon Bonaparte. We have been subject to one form or another of a tax on death since then.

Currently those who die and leave an estate are taxed at 40% on the value of the estate, i.e. the total value of all that a person owns, in excess of £325,000. If they leave their estate to a spouse or civil partner, there is no tax chargeable at that point. When the surviving spouse or civil partner dies, their £325,000 allowance can be added to their partner’s unused £325,000 Inheritance Tax Allowance. Thus tax is only then due on the amount of the estate in excess of £650,000.

The headlines from the July Budget was that the Chancellor would be protecting a family’s estate for up to £1,000,000. While that is good long range news, the facts are as follows:

• The current allowance (nil-rate band) of £325,000 is being frozen at £325,000 for the next two years.

• The increased allowance will only be phased in from April 2017 starting with an extra £100,000. That means it will not be until 2021 when the headline promised £1,000,000 provision would become available.

• The extra allowance will only be available to use in relation to residential property being passed on to children and their direct descendants.

MORE PENSION CHANGES

The Government has announced its intention to further review pensions and how they are treated tax-wise, and they are starting to crack down on pension benefits for the higher earners.

These restrictions on what higher earners can put into their pensions will come into effect from next April. While the annual maximum amount of pension contribution most people can put into their pension will remain at £40,000, those earning in excess of £150,000 will have this reduced on a sliding scale. Those earning in excess of £210,000 will have a maximum pension contribution allowance each year of only £10,000. The Government is also introducing a reduction in the pension Lifetime Allowance (the maximum one can accumulate in pension over his lifetime) from a total of £1.25 million down to £1 million from 6 April 2016.

The Government also announced it will be delaying its plans for setting up a market to allow individuals the freedom to sell their annuities. They have put back the planned starting date until 2017 to allow further studies to be done. There are further changes as to how pensions are taxed on death. Please contact us if you have any questions on these changes as they are somewhat complicated. Note: It is a very good idea to complete a letter of instruction to lodge with your pension provider to specify to whom you want the money paid in the event of your death.