Today’s Budget was the final opportunity for Chancellor George Osborne to make a financial appeal to voters before May’s General Election.
In the run-up to his speech, Osborne had promised there would be “no giveaways, no gimmicks”. But further changes to the pension system and possibly also inheritance tax had been flagged up in the media in advance.
So what did George Osborne actually deliver?
1. More pension changes
Millions of pensioners will allowed to cash in their annuities under new plans being considered by the government.
From next year, around 5 million people will be able to sell their annuities for a cash lump sum.
At present, this course of action results in a 55% tax charge but this is to be scrapped.,/p>
Find out more about the pension freedoms.
2. A cut in the lifetime pension saving allowance
The lifetime allowance (LTA) on pension savings will be cut to £1 million from £1.25 million: this is the total that can be put into a pension while qualifying for tax relief.
3. Tax-free savings
Osborne also said that the majority of savers will no longer have to pay tax on interest earned by their deposits.
From April 2016, all savers will be allowed to earn £1,000 interest tax-free a year (or £500 if they are higher-rate taxpayers).
Six taxes you can legally avoid.
4. More flexible ISAs
As of this autumn, money which is withdrawn from an ISA can be put back into it in the same financial year without losing the tax-advantages or eating into the saver’s annual ISA allowance.
5. Help for first-time buyers
A new type of ISA – the Help To Buy ISA – will also come into effect in the autumn. Under this scheme, anyone who saves for a first home will get a 25% top-up from the government, up to a maximum of £3,000.
6. Inheritance tax
Ahead of the Budget, the media widely reported that inheritance tax (IHT) would be reduced on main residences.
But no mention of this policy was made by Osborne: it may instead end up as a Tory party manifesto commitment.
The Chancellor did say he was planning to look at IHT avoidance schemes, such as deeds of variation, which allow wills to be altered after an individual’s death in order to minimise tax bills.
How to reduce inheritance tax.
7. Further changes
Osborne said he would once again freeze the fuel duty increase that had been scheduled for September, while duty on beer will fall by 1p a pint. Duty on spirits and cider will also be cut by 2%.
There will be more increases in the annual personal allowance, which means people can earn more before income tax kicks in.
Annual tax returns will be scrapped and a fully digital system will be introduced by 2020.
