Budget Summary – 20th March 2014
Unlike many years ago, the contents of the Chancellor’s red box is no longer as secretive or as surprising as it used to be. Tax rates and allowances are now announced in the Chancellor’s Autumn statement, policies are generally put out for consultation and the week before the budget, the Chancellor can be seen on TV discussing some of his policies. It is for these reasons that the annual budget speech rarely provides us with any genuine surprises. Having said that, this year the Chancellor has come up with some announcements which nobody had anticipated.
The main talking point this year is the relaxation of the rules regarding the pension benefits. It seems that from April 2015, people who have saved up a fund in a defined contribution scheme will be allowed to choose how much they take out and when they take it. They will pay income tax on what they draw, after the existing 25% tax-free lump sum, but they will not have to sign up for an annuity.
Another big announcement which will affect many people is the relaxation of the rules on tax-free Individual Savings Accounts. From July 2014, the annual investment limit will be increased to £15,000 and for the first time, individuals will be able to invest the whole amount in cash funds.
In summary, the most significant points from yesterday’s budget are as follows:
- Personal allowances and thresholds announced for 2015/16.
- Tax system starts to gear up for separate Scottish income tax rate
- Flexibility of taking pension benefits increased from March 2014
- Further significant relaxation of pension rules to come in 2015
- Individual Savings Account limits increased, rules simplified
- Seed Enterprise Investment Scheme relief’s made ‘permanent’
- Reduction in CGT main residence exemption confirmed
- Annual Investment Allowance increased to £500,000 from April 2014
- Tax charges on ‘enveloped dwellings’ to be extended to lower values
- Users of tax avoidance schemes to be required to pay tax upfront before arguing about it in court
- Confirmation of measures to close down perceived tax avoidance using partnership structures
And finally, the largest cheers of the day were for the halving of bingo duty and the reduction of a pint of beer by 1p.