The Budget: what does it mean for me?
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In case you missed it, the changes in the Budget that affect the majority of us for the tax year starting April 6, 2016 are:
- for income tax you can now earn £11,000 before you pay tax and the higher rate of 40% starts at £43,000. For dividends from shares you can receive up to £5,000 tax-free.
New rules mean that you can receive up to £1,000 of interest tax-free, if you pay tax at 20 per cent, though they are limits on how much higher-rate tax-payers can get. Banks will pay their interest without taking the tax off as a result.
This will be a particular advantage to pensioners, as they are more likely to have savings earning interest. However, if they have interest of more than £1,000 and their pension covers their £11,000 allowance, they will have to complete tax returns to pay the tax due on the extra interest.
- for those under 40 – but only from April 2017 – there will be a new lifetime ISA, where the government will add £1 for every £4 saved. It is aimed at helping people get on the housing ladder and save for retirement, so no doubt there will be rules attached to qualify.
- for capital gains tax some complicated new rules have been introduced. If you sell a vase that has been in the family for generations, a reduced rate of tax on the profit you make will apply. If you are selling a house that is not your home, the previous higher rate will apply.
- for inheritance tax, which is paid on your assets when you die, you can give away £325,000 before tax is due; for married couples this is £650,000. This has not changed for some years.
From April 6 next year there will be a new additional allowance for inheritance tax by reference to your home, but only if you leave it to your descendants. It may be prudent to review your will to make sure you qualify.
A further change that could affect your will was introduced last August by the EU. If you own a house in the EU (except Ireland or Denmark) you can dictate by your will that English law will apply, avoiding the European rules that mean you have to leave some of your home to your children, even if your spouse outlives you.
It is always a good idea to make sure that your will remains current and reflects changes in your family or other circumstances. Ensuring that the amount of tax due is arranged for the benefit of your family is just being organised.
For further help or advice, please contact senior associate Susan Bateson on 0113 280 2070 or [email protected]