Pensions, savings and investment

Help to Buy ISAs

A new ISA for first time buyers will offer a government bonus when investors use their savings to purchase their first home. For every £200 that a first time buyer saves, there will be a £50 bonus payment up to a maximum of £3,000 on £12,000 of savings. The bonus will be available for purchases of homes of up to £450,000 in London and up to £250,000 elsewhere.

The bonus will only apply for home purchase. Savers will have access to their own money and will be able to withdraw funds from their account if they need them for any other purpose. The maximum initial deposit will be £1,000 and the maximum monthly saving thereafter will be £200. The new scheme should be available from autumn 2015.

ISA investments

From summer 2015, the list of qualifying investments for ISAs will be extended to include listed bonds issued by a co-operative and community benefit society and small and medium-sized enterprise securities (not just equities) admitted to trading on a recognised stock exchange. As previously announced, the government will explore the possibility of further extending the list to include debt and equity securities offered via crowdfunding platforms. There will be a consultation in summer 2015 and a response to the earlier consultation on how to include peer-to-peer loans.

ISA flexibility

Individuals will be able to withdraw money from their cash ISA and replace it in the year without it counting towards their annual ISA subscription limit for that year. The change will be introduced from autumn 2015, following technical consultation with ISA providers.

SAVER – The ISA limit will rise to £15,240 for 2015/16. So a couple can then invest up to £30,480 in a tax free plan.

Pension annuity sale

From April 2016, an individual who is already receiving income from a pension annuity will be able to sell that income to a third party, subject to agreement from their annuity provider. The proceeds of the sale can then be taken directly or drawn down over a number of years and will be taxed at the individual’s marginal rate(s). The facility will not be available for annuities bought by the trustees of occupational pension schemes. In the hands of any purchaser of the annuity, the income will be taxable as trading income or miscellaneous income.

Taxation of inherited annuities

Beneficiaries of individuals who die under the age of 75 with a joint life or guaranteed term annuity will be able to receive any future payments from such policies tax free where no payments have been made to the beneficiary before 6 April 2015. The tax rules will also be changed to allow joint life annuities to be paid to any beneficiary. Where the individual was 75 or over at death, the beneficiary will pay income tax at their marginal rate(s).

THINK AHEAD – You should review your retirement plans especially if you are close to drawing your pension. The rules are changing on 6 April 2015 when there will be new opportunities to turn your pension fund into cash.

Lifetime allowance

From 6 April 2016 the lifetime allowance for pensions will be reduced from £1.25 million to £1 million. Transitional protection for pension rights already over £1 million will be introduced alongside this reduction to ensure the change is not retrospective. The lifetime allowance will then be indexed annually in line with CPI from 6 April 2018. There is no change to the annual allowance, which remains at £40,000.

THINK AHEAD – Maximise pension tax relief while you still can. The pension lifetime allowance is currently £1.25 million but it will be reduced to £1 million in April 2016. What’s more, the annual allowance of £40,000 could be cut after the election. Take advantage of the generous carry-forward rules to maximise your retirement provision while you still have the opportunity.

Personal savings allowance

From 6 April 2016 the government proposes to introduce a new personal savings allowance to remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers. Additional rate taxpayers will not receive an allowance. As part of these reforms, HMRC will introduce automated coding out of savings income that remains taxable through the PAYE system from 2017/18, with pilot schemes starting in autumn 2015.

Peer-to-Peer (P2P) lending

A new relief will be introduced allowing individuals lending through P2P to offset against other P2P income any losses from loans which go bad, as previously announced. The change will be effective from April 2016 and through self-assessment will allow individuals to make a claim for relief on losses incurred on new loans from 6 April 2015.

Premium bonds

The planned increase to the NS&I Premium Bond investment limit to £50,000 will take place on 1 June 2015.

Venture capital schemes

From 6 April 2015 companies benefiting substantially from subsidies for the generation of renewable energy will be excluded from also benefiting from EISs, SEISs and VCTs, as previously announced. There will be an exception for community energy generation undertaken by qualifying organisations, which will in future become eligible for the social investment tax relief.

Subject to state aid approval, further changes will be made to venture capital schemes. These include a new qualifying criterion in certain cases to limit relief to companies where the first commercial sale took place within the previous 12 years. There will also be a cap on the total investment a company can raise under EISs and VCTs of £15 million, or £20 million for companies that meet certain conditions demonstrating that they are ‘knowledge intensive’.

Charity authorised investment funds

The government is working with the Financial Conduct Authority (FCA), the Charity Investors’ Group and the Charity Commission to introduce a new Charity Authorised Investment Fund structure. This will bring new investment funds established for charitable purposes under FCA regulation, ensuring that they receive the same regulatory oversight and protections as funds for retail investors.

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