11 / 16
10
| Savings & Pensions
SAVINGS &
PENSIONS
DIVIDEND TAXATION
The existing dividend tax credit is being
abolished from April 2016 and a new
dividends allowance of £5,000 a year
is being introduced.
Tax on dividend income above the
allowance will be charged at:
•
7.5% for basic rate taxpayers
•
32.5% for higher rate taxpayers
•
38.1% for additional rate taxpayers.
SAVINGS AND INTEREST
A personal savings allowance is being
introduced from 6 April 2016 to remove
tax from up to £1,000 of savings income
from a basic rate taxpayer and up to £500
for higher rate taxpayers. Additional rate
taxpayers will receive no allowance.
Interest from open-ended investment
companies, authorised unit trusts,
investment trust companies and
peer-to-peer lenders may be paid without
deduction of income tax from April 2017.
LIFETIME ISA AND ISA LIMIT
A new lifetime ISA will be available for
adults under the age of 40 from
April 2017. Individuals will be able
to contribute up to £4,000 per annum and
will receive a 25% state bonus.
Funds, including the bonus, can be used
to purchase a irst home at any time after
the irst annual anniversary of opening the
account. Funds may be withdrawn from
the age of 60.
The overall annual ISA subscription limit will
increase from £15,240 to £20,000 from
6 April 2017.
HELP TO SAVE
Individuals in low income working
households will be able to save up to
£50 per month into a Help to Save account
and receive a 50% government bonus
after 2 years.
Account holders can then choose to
continue saving under the scheme for
a further 2 years. The scheme will be
introduced no later than April 2018 and will
be open to all adults in receipt of universal
credit with minimum weekly household
earnings equivalent to 16 hours at the
national living wage or those in receipt
of working tax credits.
PENSION FLEXIBILITY
A number of minor changes are being
made to the pensions tax rules to ensure
that they operate as intended following
the introduction of pension lexibility
in April 2015.
The changes will be effective from the day
after the date of royal assent to
Finance Bill 2016. They will:
•
replace the 45% tax charge on serious
ill-health lump sums paid to individuals
who have reached the age of
75 with taxation paid at the individual’s
marginal rate
•
enable money purchase pensions
in payment to be paid as a trivial
commutation lump sum
•
remove the requirement that a serious
ill-health lump sum can only be paid
from an arrangement that has never
been accessed
•
enable dependants with drawdown
or lexi-access drawdown pension who
would currently have to use all of this
fund before age 23 or pay 45% tax
charges of up to 70% on any lump sum
payment to continue to access their
funds as they wish after their
23rd birthday.
REDUCTION OF LIFETIME
ALLOWANCE
As announced at Budget 2015 the
pensions lifetime allowance is reducing
from £1,250,000 to £1,000,000
with effect from 6 April 2016.
ENTERPRISE INVESTMENT
SCHEME AND VENTURE
CAPITAL TRUSTS
Changes are being made to ensure that the
enterprise investment schemes
(EIS) and venture capital trusts (VCT)
legislation introduced in Finance (No 2)
Act 2015 works as intended.
A new condition will be introduced from
6 April 2016 to clarify the non-qualifying
investments a VCT may make for liquidity
management purposes.
The methods of determining the 5 year
period for the average turnover amount
and the relevant 3 preceding years for the
operating costs conditions will be clariied
for both EIS and VCTs to ensure that the
most recently iled accounts of a company
are generally used to determine the end
date of the relevant period.
The operative date will be 18 November
2015, although an investee company may
elect to apply the existing legislation for
investments received between
18 November 2015 and
5 April 2016 inclusive.