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Reading Time | < 1 min 06 Apr 2016

New tax year brings changes for savers

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The start of the new tax year signals the arrival of a range of changes to taxation for businesses and individuals. 

Here’s a summary of the changes relating to personal savings coming into effect in April 2016.

Personal savings allowance

A new allowance of £1,000 will be introduced for income earned on people's savings. 

Basic rate taxpayers with a total income of £43,000 a year are eligible for the savings allowance, meaning they will pay no tax on the first £1,000 of their savings income.

Higher rate taxpayers earning between £43,001 and £150,000 will be eligible for a personal savings allowance of £500.

Money withdrawals from ISA accounts

People with ISA accounts can now withdraw money during the tax year without it counting towards the annual ISA limit.

This comes alongside a new Lifetime ISA announced in Budget 2016. From April 2017 adults under 40 will be able to save up for £4,000 each year while receiving a 25% bonus (£1000) from the government.

The ISA limit will also increase from £15,240 to £20,000 from April 2017.

Commenting on the personal savings allowance in February 2016, Low Incomes Tax Reform Group chairman, Anthony Thomas, said:

“The highly complex operation of the savings allowance must be addressed to improve its clarity and avoid people feeling that they face arbitrary and unjust tax bills.

“People should keep an eye on their level of savings income to ensure they do not stray into a different taxable band.

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Reading Time | < 1 min 05 Apr 2016

New state pension comes into effect

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A new single-tier state pension will be introduced for those who reach their state pension age on or after 6 April 2016. 

The full state pension will be set at £155.65 a week.  Men born after 6 April 1951 and women after 6 April 1953 are eligible for the new system.

Workers will be required to have 10 years’ worth of national insurance contributions (NICs). 35 qualifying years is also required for the full new state pension which has been extended from 30 years.

Workers who have already retired before 6 April 2016 will continue on the old two-tier system where they’ll receive the basic state pension of £115.95 a week plus additional savings (Serps).

In March 2016, Daniela Silcock, head of policy research at The Pensions Policy Institute, said:

“Once the new state pension has been fully phased in there will no longer be significant differences in state pension income between women, ethnic minorities, disabled people, carers, the self-employed and the average for all pensioners.

“However, lower private pension saving and income among the under-pensioned are projected to continue.”

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Reading Time | < 1 min 04 Apr 2016

Range of tax changes for businesses

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Several tax changes have come into effect from 1 April 2016 that will affect businesses.

The following tax changes have come into effect from 1 April 2016.

  • Small Business Relief Scheme - the scheme has been extended for another year, saving businesses an average of £890
  • Fuel duty - duty has been frozen for the sixth year running. 

Further tax changes will be introduced 6 April 2016. These include:

  • national insurance contributions (NICs) – businesses will be exempt from paying employer NICs for apprentices under 25
  • employment allowance – increasing the NIC allowance for all businesses and charities from £2000 to £3000
  • capital gains tax (CGT) – reduced CGT, excluding carried interest and gains on residential property.

Financial secretary to the Treasury, David Gauke, said:

“Businesses are the lifeblood of the economy and we’re committed to backing them because we know that it is their enterprise and innovation that will deliver growth and opportunity for the next generation.

“The much welcomed tax breaks we’re delivering will support millions of businesses to take on more apprentices, create more jobs and expand their operations.”

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Reading Time | < 1 min 01 Apr 2016

Stamp duty changes come into effect

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New stamp duty rates for people investing in buy-to-let property and second homes came into force on 1 April 2016.

Individuals who purchase a second home or buy-to-let investments will have to pay a 3% surcharge on additional property over £40,000. 

The new charge will likely have an effect on additional property purchase costs with new rates payable on a house costing £275,000 rising from £3,750 to £12,000.

Stamp duty rates

The following rates will apply when purchasing an additional property over £40,000:

Property price

New rates (1 April 2016)

*£0 - £40,000

0%

**£0 - £125,000

3%

£125,001- £250,000

5%

£250,001- £925,000

8%

£925,001 - £1.5m

13%

£1.5m +

15%

 *Property price £40,000 or less.

**Property price over £40,000.

Land and Buildings Transaction Tax (LBTT)

Rate changes also come into force for those seeking to purchase buy-to-let properties in Scotland. The following LBTT rates will be charged on buying a property as your primary residence for over £145,000.

Property price

New rates (1 April 2016)

*£0-£40,000

0%

**£0 - £145,000

3%

£450,001 - £250,000

5%

£250,001 - £325,000

8%

£325,001 - £750,000

13%

£750,001+

15%

 *Property price total is £40,000 or under.

**Property price total is over £145,000.

These rates also apply to second homes and holiday homes.

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Reading Time | < 1 min 31 Mar 2016

Businesses cautious before national living wage introduction

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The national living wage (NLW) comes into effect on Friday 1 April 2016.

Research by Federation of Small Businesses (FSB) found that over 38% of employers expect the NLW to have a negative impact on their business, whereas only 6% thought the policy would have a positive impact.

With NLW projections expecting to it to rise to around £9.15 by 2020, 54% of employers said the new changes would still have a negative impact on their business.

When asked about adapting to the NLW, 54% said they would restrain from hiring new staff while 50% said they would increase their prices.  

Other measures some employers stated they would take:

  • cut staff hours (41%)
  • reduce staff (31%)
  • cancel or postpone planned investments (26%)
  • freeze or reduce wages of higher paid staff (29%).

Mike Cherry, FSB national chairman, said:

“Our research suggests that over half of small firms already pay their staff more than the voluntary Living Wage, but those that don’t are often operating in highly competitive sectors with very tight margins. 

“While it is easy to say everyone deserves a pay rise, the only way to deliver and sustain higher wages in the long run is to improve productivity, boost skills and drive business growth. Without the right type of productivity growth, there is a real risk that in many sectors higher enforced statutory wages will lead to fewer jobs being created, fewer hours for existing staff and, unfortunately in some cases, job losses.”

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Reading Time | < 1 min 30 Mar 2016

Starter home plan announced

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Housing sites of 10 homes or more will need to make 1 house in 5 a starter home under new plans published by the government.

The changes will aim to support 200,000 new homes for first-time buyers under 40 as part of plans to build 1 million new homes - offering affordable sale, rental and private purchases.

Starter homes will be offered at 20% below market value, helping buyers to purchase affordable housing on moderate incomes.

Other measures include: 

  • starter homes can only be resold to other first time buyers, at a discount for 5 to 8 years after purchase
  • starter homes will be prevented from becoming buy-to-let opportunities
  • joint purchasers will be eligible for a starter home when one partner is above 40 and the other is below.

The new plan is the latest government measure aimed at people under 40 who are looking to purchase their first home. Budget 2016 saw a new lifetime ISA announced for adults to help them save towards their first home. 

From April 2017 adults under 40 will be able to save up to £4,000 each year while receiving a 25% government bonus up to £1000.The ISA limit will also increase from £15,240 to £20,000 a year.

Housing and planning Minister Brandon Lewis, said:

“We want to ensure young people who aspire to own their own home can settle down and enjoy the security home ownership brings.

“This is why we have committed to building 200,000 high quality homes exclusively for first time buyers backed by £2.3 billion government funding to get building underway including on brownfield sites.”

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Reading Time | < 1 min 29 Mar 2016

Demand for cashing in pensions “settling down”

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A year on from the introduction of pension freedoms in 2015, the demand for cashing in pensions pots has begun “settling down” according to data from the Association of British Insurers (ABI).

Annuities have seen a rise in popularity while the number of outstripped income drawdown products rose in the last quarter to 21,200 - worth £1.1 billion.

The ABI’s latest data shows that since April 2015:

  • £3 billion was paid out in 213,000 cash lump sum payments, with an average payment of £14,800
  • £2.9 billion was paid out in 835,900 income drawdown payments, with an average of £3,500
  • £4.2 billion was invested in 63,600 income drawdown products, with an average fund of £66,000
  • £3.3 billion was invested in 61,700 annuities, with the average fund of £53,000.

Dr Yvonne Braun, director of policy for long term savings and protection at ABI, said:

"Following some initial pent up demand, the number of people accessing their pension pot as cash in one go has settled down. People are taking a sensible approach and considering how they will pay for their whole retirement.

"Our key challenge remains ensuring people save enough for their retirement. With increasing life expectancy and declining final salary pension provision, we must turn our attention to helping customers grow bigger pots."

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Reading Time | < 1 min 24 Mar 2016

Lack of policies supporting gender pay gap

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The gender pay gap represents a significant loss to productivity, according to research by the Women and Equalities Committee (WEC).

The gender pay gap is the difference in hourly pay rates between the average man and woman in both full and part-time employment. Currently the gap stands at 19.2%. The gender pay gap does not measure the difference paid to men and women in the same or broadly equivalent roles. The WEC has highlighted a number of key causes of the current gap:

  • the part-time pay penalty (41% of female workers are part-time compared to 21% of men)
  • women’s inconsistent responsibility for childcare
  • unpaid caring
  • concentration of women in industries associated with low pay and low progression.

The pay gap has remained at roughly the same level for the past 4 years, falling from 27.5% in 1997. Women aged over 40 have been the most effected by the gender pay gap, while women aged 50-59 are facing a 27% disparity in pay. 

The WEC also found:

  • men and women sharing childcare is an effective policy lever in reducing the gender pay gap
  • women trapped in low paid part-time work below their skill level resulted to pay disparities, contributing to skill costs up to 2% GDP (around £36 billion).

Chair of the committee, Maria Miller, MP, said:

"The gender pay gap is holding back women and that isn’t going to change unless the government changes its policies now.

“If the government is serious about long-term, sustainable growth it must invest in tackling the root causes of the gender pay gap. Adopting our recommendations would be a significant step towards achieving the goal of eliminating the gender pay gap within a generation."

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Reading Time | < 1 min 23 Mar 2016

Many grandparents planning on passing inheritance to grandchildren

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70% of grandparents are planning on leaving an inheritance to their grandchildren, while 55% will ring fence the money to ensure it is passed on, according to research by SunLife (SL).

Half of the grandparents surveyed enjoyed spending time with their grandchildren more than they do with their own children.
This has led to the decision for grandparents to pass on their will directly to their grandchildren.

SL also found:

• 80% of grandparents provide some form of childcare to their grandchildren, ranging from babysitting, school runs and day care
• grandparents spend an average of £62 a month on their grandchildren
• the most popular things bought for grandchildren are days out, toys and books.

Overall grandparents do to not discourage spending money on their grandkids, however a third dislike the idea of having to cover for school and travel expenses.

Ian Atkinson, spokesman at SunLife, said:

"It's not news that grandparents love their grandchildren and are more than willing to help out with childcare - but it is interesting to see that actually, almost half feel put upon at least some of the time. And the fact that over two thirds plan to leave an inheritance direct to their grandchildren shows how much they're in their thoughts.

"Of course, if you are planning to leave your grandchildren an inheritance, it's important to have an up-to-date will. Without one, the law will decide what happens to your estate so your wishes might not be met."

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