Osborne’s Big Budget

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Osborne’s Big Budget

The Budget on 8th July was lauded as radical in some quarters, but when you look at the detail, I don’t think that it was really much of a surprise writes Darren Scoon.

Osborne confirmed a few things that we already knew:

and introduced a few things that are new, none of which were a great surprise, but each one could provide some opportunities.

Alignment of Pension Input Periods with Tax years - What’s a Pension Input Period? Well it’s used to measure how much has been contributed (known as the pension input amount) against the annual allowance, basically making sure you don’t over contribute and claim tax relief. The change presents an opportunity for those who have already maximised their pension contributions for the year (or those who would have maximised over the course of the year) to perhaps pay in additional contributions prior to 5 April 2016.

The big pension announcement was saved for high earners, with a cut in their Annual Allowance. Clients with income over £150k will have their annual allowance cut from the 2016/17 tax year, creating a ‘get it while you can' pension funding window this tax year.

Lastly on the Pensions front was the announcement of a review of the pensions tax framework. There has been a lot of speculation about pension reforms and changes to taxation so this was expected.  We welcome this consultation as it raises the prospect of radical reform to restore the vision of a genuinely ‘simplified' retirement saving framework and will of course keep you up to date.

Inheritance Tax: probably grabbed the main headlines with the Government introducing a new IHT property nil rate band of up to £175,000 where the family home is passed to children or grandchildren.

Who will benefit, anyone who:

  • passes the family home to their children or grandchildren on death;
  • had a family home, then downsized (passing on assets of equivalent value to children/grandchildren); and
  • has an estate below £2M.

The sting in the tail however is that the band will be phased in from 2017/18, starting at £100k and rising each year with the full band of £175k being introduced in 2020/21. Overall this is good news as the new property nil rate band can be transferred between spouses or civil partners. This means a married couple could pass £1M in 2020/21 to their children, tax free on death, provided the family home is worth at least £350,000, saving £140,000 in IHT.

Clients who could benefit from the property nil rate band may need to revisit their existing wills to ensure they continue to reflect their wishes and remain as tax efficient as possible.

Lastly on the budget, the chancellor announced some ISA changes, allowing savers to dip into the savings and replace them without it affecting their annual subscription limits. This will go ahead from 6 April 2016. The devil is in the detail however with rules around same tax years for withdrawals and payments so again, if this is something you would want to consider then speak to your adviser in the first instance.

If you think you could be affected by any of these changes then please contact your adviser to discuss your options. 

"Inheritance Tax: probably grabbed the main headlines with the Government introducing a new…"

Darren Scoon (Strategic Business Manager)