Archive for March, 2015

Banks to stop taking tax on interest paid

Tuesday, March 31st, 2015

 From 6 April 2015 you won’t have to pay tax on interest received if your total income is less than £15,600.

As part of a wider relaxation for savers, the recent Budget pledged to introduce a Personal Savings Allowance (PSA) from 6 April 2016. The main features of the new PSA are:

  1. If your taxable income is less than £42,700 the first £1,000 of your savings income will not be taxed.
  2. If your taxable income is between £42,701 and £150,000 a year the first £500 of your savings income will not be taxed.
  3. If your taxable income is over £150,000 a year you will not be eligible to claim the PAS and all your savings income (interest received) will be taxed.

At present, the banks (including building societies) deduct tax at 20% before they credit you with interest paid on your savings. In order to accommodate the new PAS, from 6 April 2016 these deductions will cease and interest will be paid gross, without deduction of tax.

Savers in receipt of significant interest receipts, and those paying income tax at the 40% or 45% rates, should take care to reserve part of their interest received to cover any income tax due; otherwise, what you receive from the banks after 6 April 2016 may create unexpected and unwelcome income bills…

First time buyers savings plan

Friday, March 27th, 2015

 If you are a first time buyer a new savings scheme introduced in the Budget last week is well worth considering.

 Nick named the Help to Buy ISA, the ISA will allow you to save up to £200 a month, and if you fulfil the various conditions set out below, the Government will boost your savings by 25% when you purchase your first home. This is how it will work:

  

  • new accounts will be available for 4 years, but once you have opened an account there’s no limit on how you long you can save for
  • accounts will be available through banks and building societies from Autumn 2015
  • you can make an initial deposit of £1,000 when you open the account – in addition to normal monthly savings there is no minimum monthly deposit – but you can save up to £200 a month
  • accounts are limited to one per person rather than one per home – so those buying together can both receive a bonus
  • only available to individuals who are 16 and over
  • the bonus is available to first time buyers purchasing UK properties
  • minimum bonus size of £400 per person
  • maximum bonus size of £3,000 per person
  • the bonus will be available on home purchases of up to £450,000 in London and up to £250,000 outside London

 

The Government bonus will be paid when you buy your first home.

Stolen mobile charges to be capped

Thursday, March 26th, 2015

 Major mobile networks have confirmed plans to introduce protection for consumers from huge bills run-up on stolen mobiles following Government action.

Under the voluntary agreement, five mobile networks – EE, O2, Three, Virgin Media and Vodafone – will protect around 27 million consumers on pay monthly contracts from being hit with shock bills through no fault of their own. They will all offer consumers a liability cap set at £100 when reported within 24 hours of being lost or stolen to the mobile network and police.

Ed Vaizey, Minister for the Digital Economy, said:

Protecting hardworking families from shock bills through no fault of their own has been a priority for this government. By working with the mobile operators, we have secured an agreement that will provide consumers with real benefits as well as offer peace of mind.

According to the National Mobile Phone Crime Unit (NMPCU) around 300,000 mobiles are reported stolen to the police each year in the UK.

Three has been the first mobile network to introduce this protection for its customers in January 2015. The other operators have now confirmed their plans:

  • EE will introduce in the coming weeks;
  • O2 will introduce the cap by September 2015;
  • Virgin will introduce the cap from 1 July 2015; and
  • Vodafone will introduce the cap this summer.

The protection comes as part of a new Code of Practice that all five mobile operators have signed up to. The code will also help protect consumers themselves from unexpectedly high bills and excessive costs from:

  • Out of bundles charges – by providing clear and transparent pricing information, alerts when they reach data bundle limits or the ability to monitor usage.
  • Roaming – providing information on how to turn off data roaming and avoid roaming charges.
  • Premium Rate Services and in-app purchases – provide barring function so consumers can protect against unauthorised or inadvertently calls to premium rate voice services, and protections against in-app purchases.

Pension freedoms to be extended to annuitants

Monday, March 23rd, 2015

The Chancellor has announced that the government will extend its pension freedoms to around 5 million people who have already bought an annuity.

From April 2016, the government will remove the restrictions on buying and selling existing annuities to allow pensioners to sell the income they receive from their annuity without unwinding the original annuity contract.

Pensioners will then have the freedom to use that capital as they want – just as those who reach retirement with a pension pot can do under the pension freedoms announced in Budget 2014. They can either take it as a lump sum, or place it into drawdown to use the proceeds more gradually.

The new flexibilities build on the radical reforms announced in last year’s Budget, and due to come into effect on 6 April, which allow people to make their own, informed choice about what they do with their savings in retirement. This could include being able to draw down from their defined contribution pension pots a bit at a time or taking their pension as a lump sum.

Chancellor of the Exchequer George Osborne has said:

“There are 5 million pensioners who are locked into annuities they have already bought. They should have the same freedoms as we have given everyone else.

For most people, sticking with that annuity is the right thing to do. But there will be some who would welcome being able to draw on that money as they choose – the same freedom we are offering those approaching retirement in April this year.

So I am going to change the law to let that happen, and make sure we have the right guidance in place.

People who’ve worked hard and saved hard all their lives should be trusted with their own pension.”

Currently people wanting to sell their annuity income to a willing buyer face a 55% tax charge, or up to 70% in some cases. The government will remove this charge, so people are taxed only at their marginal rate.

To ensure people are in a position to make an informed decision, the government will be working with the Financial Conduct Authority (FCA) to introduce appropriate guidance and other consumer protection measures.

For the great majority of customers, selling an annuity will not be the right decision. However individuals may want to sell an annuity for instance to provide a lump sum for relatives or dependants; pay off debts; in response to a change in circumstances for example getting divorced or remarried; or to purchase a more flexible pension income product instead.

On Wednesday, 18 March, the government will launch a consultation on the measures that are needed to establish a market to sell and buy annuities.

Donald’s Budget Blog

Thursday, March 19th, 2015

Donald’s light hearted comments on the Budget are here:-  Donald’s Budget Blog 2015

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