Budget 2014 Summary
20th October 2014
Mr Osborne announced "The message from this Budget is: you have earned it, you have saved it, and this Government is on your side, whether you're on a low or middle income, whether you're saving for your home, for your family or for your retirement."This is a Budget for the makers, the doers, and the savers."
Here are some of the main points that we are discussing with our clients in answer to their questions.
Mr Osborne stated that the changes - due to come into law by April next year - were "the most far-reaching reform to the taxation of pensions since the regime was introduced in 1921".
Taking Pension Benefits from April 2015
There will no longer be restrictions on how individuals aged over 55 can access their defined contribution pension pots. The government proposes (subject to a consultation) to change the tax rules to allow people to access these savings as they wish at the point of retirement, subject to their marginal rate of income tax.
25% of the value of the fund will continue to be tax free.
Transitional Measures to April 2015
For those over age 60, the trivial commutation limit will rise from £18,000 to £30,000 for commutation payments made on or after 27 March 2014. The payments can be made as one or more lump sums. For trivial commutation payments, there will no longer be a requirement to revalue previously crystallised pension benefits up to the date of the commutation payment to determine how much can be commuted.
For those over age 60, the small pots (or stranded pots) rules will be increased from 2 payments of £2,000 to 3 payments of £10,000.
The personal allowance will be increased to £10,500 from 6 April 2015. The basic rate band will reduce to £31,785 from 6 April 2015.
As announced in the Autumn Statement, with effect from 6 April 2015, a married individual or a civil partner will be able to transfer £1,050 to their spouse/civil partner. This is only possible if both parties are basic rate taxpayers.
From 6 April 2015, savings rate band replaced with a zero rate band commencing at £5,000, which will be on top of the personal allowance but will still be applicable to savings income. Legislation will also be amended to ensure that savers who are non taxpayers can register to receive gross interest payments.
Cash and stocks & share ISAs are to be merged into a single New ISA with an annual tax-free savings limit of £15,000 from 1 July 2014. The limit for Junior ISAs/ will be raised to £4,000.
A new Pensioner Bond with market leading rates will be available from January 2015 to all people over 65, with interest rates of 2.8% for one-year bonds and 4% for three year bonds, with a £10,000 limit in each.
The cap on the amount of Premium Bonds an individual can hold will rise from £30,000 to £40,000 in June 2014 and to £50,000 in 2015.
*Some of the information in this article has been taken from the SimplyBiz website.Back to News Archive