Budget Highlights – Pensions Survive…For Now!
After all the pre-budget rumours that George Osborne was going to remove pension tax relief, last Wednesday was pretty quiet as far as pensions were concerned.
The Chancellor confirmed there would be no imminent changes to pension tax relief. Salary sacrifice is also here to stay as it was confirmed that it could continue to be a tax and national insurance efficient option to fund a pension.
The big highlight of the budget as far as your personal finances are concerned was the introduction of a new Lifetime ISA (LISA). The Chancellor promoted this as a complimentary savings scheme for younger savers rather than an alternative to pensions. But is this the start of a move to an eventual Pension ISA, replacing existing traditional pensions? Time will tell.
The new LISA will be launched from April 2017 and will allow savers aged between 18 and 40 to save up to £4,000 per year. The government will add a 25% bonus to your savings pot. Which you can then use from age 60 as a tax free income or you can access it earlier in order to buy a house. The downside to accessing it before age 60 if you are not buying a house is a 5% penalty.
In other good news, the rate of Capital Gains Tax (CGT) is reducing from 18% to 10% for basic rate tax payers and from 28% to 20% for higher rate tax payers from the 6th April 2016.
Don’t forget, regardless of the budget, we already know there are a number tax changes for pensions, high earners, BTL landlords and share/fund investors coming into force on 6th April 2016. To find out more download our free budget guide at https://wealthandtax.co.uk/budget-2016-planning.html