Budget 2014 timetable: The saver’s and investor’s guide to when the key changes will happen

21st March 2014

img

In his Budget speech to the House of Commons this week designed to win the hearts, minds and indeed votes of the nation’s “makers, doers and savers”, the Chancellor George Osborne dropped a number of bombshells writes Philip Scott.

We outline the key points and changes outlined by the Chancellor and as importantly when you can expect to see them take shape.

Isas

The limit savers can squirrel away into a tax efficient Isa wrapper is set to jump by 30% from the current threshold of £11,520 to £15,000 from 1 July this year.

The other big change is that now, consumers can fill their Isa to the brim with cash, whereas beforehand, only half the £11,520 cap could be used in this manner.

On top of this, other regulations around Isas are being relaxed. Presently savers can transfer their cash Isa into a stocks and shares account but not the other way around. But this rule is set to be scrapped, allowing cautious investors for the first time to move their money out of funds and shares and into a cash Isa.

Junior Isas/Child Trust Funds

At the same time, on 1 July, young savers will also enjoy the benefit of the overhaul, as the saving restrictions for Junior Isas and their predecessor the Child Trust Fund (CTF) are also set to rise, albeit marginally, from £3,720 to £4,000 from this April 6th. Transfers from CTFs to Junior ISA are penciled in to go ahead from 6 April next year.

Tax-free allowance

From April, the tax-free personal allowance  will rise from £10,000 to £10,500, which according to the Government will benefit the average basic or higher-rate taxpayer by around £100 per annum. Married taxpayers will also see a change to their taxes too, as the Chancellor confirmed the transferable tax allowance for married couples and civil partners will be set at 10% of the personal allowance from 2015-2016 – that’s £1,050 per person. In addition the limit for 40p income tax will increase  from £41,450 to £41,865 and by a further 1% to £42,285 from 2015.

Premium Bonds

Premium Bonds also came under the spotlight and received their own fillip as the ceiling on investments in National Savings & Investment products is being raised, for the first time in a decade by a third from £30,000 to £40,000 in June.

In addition, the amount savers can stash away in Premium Bonds will increase again in 2015-2016 to £50,000 – and the number of £1m prizes will double to two per month from August.

Pensions

In what has been hailed as the biggest shake-up the pensions industry has witnessed in years, the Chancellor announced that the Government is to lift the effective requirement of retirees to buy an annuity, where savers exchange their pension pot for an income for life. Until now savers have typically had to buy an annuity with their pension. But the government is to consult on how retirees can take their whole pension as a lump sum from April 2015.

Essentially, retiring Britons will be able to take their entire nest-egg as one lump sum and do with it as they see fit. Under these plans, the taxable part of the pension pot taken as cash, i.e. 75% of the total, on retirement will be charged at the normal income tax rate.

However in the meantime, greater flexibility will be introduced as soon as next week, on 27 March. From this point those with total pension savings under £30,000 will be allowed to draw them as a lump sum and those with defined contribution worker pensions worth less than £10,000 will also be allowed to take the lot. In addition, the drawdown limit will be increased from 120% to 150% of an annuity and flexible drawdown will be available to those with a secure income of £12,000 or more, down from the previous maximum of £20,000.

Parents

From autumn 2015, the tax-free childcare costs limit, against which parents can claim 20% support from the Government will increase from £6,000 to £10,000, meaning that for every 80p a parents spend on childcare, the government will add 20p.

Leave a Reply

Your email address will not be published. Required fields are marked *