Today’s Autumn Statement saw George Osborne declare he was backing the aspirations of savers with changes to ISAs and Stamp Duty. The Chancellor also confirmed the changes to ISAs and Pensions announced earlier in the year.
We already knew that from April 2015, savers will have greater flexibility over how they access their pensions on retirement. People over 55 will be able to drawdown from their pension in a way that suits them, rather than being forced into buying an annuity. Although pensions will remain top of many people’s agendas, there were some important announcements for savers.
There was good news for ISA savers from the Chancellor today. ISAs will now be transferrable to spouses and civil partners tax-free on death. This adds to a more general overhaul of estate planning as the 55% ‘death tax’ has been abolished.
True Potential has encouraged the Treasury to continue raising the annual ISA allowance, which increased to £15,000 this year, so we welcome today’s announcement that it will go up again to £15,240 from April. For a couple, this means that they can shelter £30,480 from the tax man each year.
With cash savings still offering low returns, increasing the amount that can be invested tax-free in a Stocks and Shares ISA is great news for savers.
Stamp Duty reforms
Saved for last in the Autumn Statement, and regarded as the ‘rabbit in the hat’ for the Chancellor, was a complete reform of Stamp Duty. The tax, which has long been criticised, will move to an income tax style of marginal rates. George Osborne claims that 98% of house buyers will be better off under the new system.
The changes take effect from midnight tonight and should allow people to get on to the property ladder more quickly by reducing their tax burden.
Here are the new rates:
- Up to £125,000 – 0%
- 2% on the portion up to £250,000
- 5% on the portion up to £925,000
- 10% on the portion up to £1.5m
- 12% on anything above £1.5m
More reasons to feel optimistic
There was more for savers to celebrate in this Autumn Statement with rises in tax allowances, but the relatively low inflation predictions are still higher than the average interest savers receive from their bank, meaning that cash savings will continue to lose value year on year.
The highlights include:
- Inflation predicted to be 1.2% in 2015 and 1.7% in 2016
- Personal tax allowance to rise to £10,600 from April
- Higher rate tax band to rise to £42,385
- Fuel duty frozen
There was also good news on the economy, which may see savers’ confidence grow:
- The economy has grown 8% since 2010 and is predicted to grow by 2.4% next year
- Unemployment is set to fall to 5.4% next year
- The UK’s deficit is set to fall until reaching a surplus in 2018
- New 25% tax on profits generated by multi-nationals that are shifted out of the UK
We’re pleased to see the Chancellor committing to rewarding savers in his Autumn Statement. ISAs are now more attractive than ever, with a rising tax-free allowance and the ability to transfer to a spouse on death whilst retaining tax status. The Stamp Duty reforms will also help those saving to buy a home by reducing a significant part of the costs involved.
This article is based on True Potential’s interpretation of the Autumn Budget Statement published on the 03/12/14. It is a broad summary and cannot cover every nuance, you should not take or refrain from taking any action based solely on this article.