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Posted on: 25 March 2015

We bring you a summary of the key changes announced today

Before any General Election, 'The Budget' typically brings with it a number of headline grabbers and today's was no exception, with major changes announced to impact savers. Unsurprisingly, it was intensely political, with George Osborne looking to out-manoeuvre the opposition ahead of May 7.

The changes bring both good and bad news for savers. We have provided a high level summary below but as always, please contact us if you wish to discuss how these might impact you personally.

Pension Lifetime Allowance to reduce from £1.25m to £1m

The current pension lifetime allowance of £1.25m will be reduced down to £1m from April 2016. However, from 2018, it will begin to rise in line with inflation.

The change will be seen by many as going against the ethos of pension freedoms announced last year. As ever, we will wait to hear more on the detail and importantly, what protection the Government will offer savers with existing pensions close to or above the £1m threshold.

Retirees will be able to sell annuities from April 2016

Further to speculation this week, the Chancellor confirmed retirees will be allowed to sell their annuity contracts for cash from April 2016, without facing 'punitive tax charges'. The government said, at present, people wanting to sell their annuity to a willing buyer face a 55% tax charge or up to 70% in some cases. Osborne said it would remove this 'punitive' charge so people are taxed only at their marginal rate of tax. The Government also said the Financial Conduct Authority (FCA) would be asked to introduce guidance and consumer protection measures to prevent mis-selling.

Flexible ISAs

A new fully flexible ISA will allow individuals to withdraw money from their ISA and put it back in, within the same tax year, without losing the tax free status. Under current ISA rules, whenever a person takes money from their ISA, they are not able to put it back in using the same allowance. For example, with the current ISA contribution limited to £15,000 per annum, a contribution of £3,000 would lower the remaining allowance to £12,000. If that £3,000 was taken back out, the allowance would remain at the lower level of £12,000. The changes, which make it possible to withdraw money without losing the full allowance, will come into effect from autumn this year.

The Chancellor also announced a new ISA scheme linked to the Government's Help To Buy scheme.

Other changes

For basic-rate taxpayers, the first £1,000 of interest will be tax-free from April 2016. For higher rate taxpayers the first £500 will be tax-free. There is no change for top-rate taxpayers;

  • The higher-rate tax threshold will increase to £43,300 from April 2017;
  • Personal allowance to increase to £10,600 from April 2015, to £10,800 from April 2016 and to £11,000 from April 2017; and
  • New measures will be reported in autumn this year around inheritance tax avoidance.


How we can help

If you would like to know anything further or to understand how the rule changes impact your personal wealth plans, please don't hesitate to contact your Duncan Lawrie Relationship Manager.

Information provided in this article and opinions expressed are for general information and not personal to your circumstances. They are not intended to provide specific financial advice.