Keith Phillips, director of the Sleaford office, of Duncan & Toplis takes a look at some of the key announcements in the Budget statement...
Perhaps the biggest change announced in the Budget speech was the plan to abolish tax returns over the course of the next five years. Rather than completing an annual return, taxpayers would instead have an online ‘digital tax account’.
The intention is that taxpayers can review their tax position throughout the year and manage their payments online as well.
The introduction of a Personal Savings Allowance exempting the charge to tax on interest up to £1,000 (£500 for higher rate taxpayers) is expected to remove many taxpayers from self-assessment altogether – a welcome simplification meaning tax will no longer be required to be deducted at source from bank interest.
The combination of the move to digital tax accounts together with the Personal Savings Allowance could reduce the annual tax compliance burden on directors and higher rate taxpayers who are predominantly in receipt of employment income, but it is likely that the self-employed and those with substantial investments (whether that be rental property, shares or otherwise) will still have to report this income to HMRC, albeit in a different format.
Saving for a first home has become easier following the introduction of the Help to Buy ISA. As well as tax-free savings, the Government has also announced that it will contribute a further 25 per cent of the value of the fund within the ISA (up to a maximum contribution of £3,000) when the first home is purchased.
These ISAs are only expected to be available for four years, and there are limits to the level of investment that can be made in the ISA, so if these are of interest it may be worth looking into this as soon as they come into existence in the autumn of this year.
The additional flexibility previously announced regarding pension drawdown is also to be extended to those with annuities. It is proposed that existing entitlements under an annuity can be sold for a lump sum. In common with all investment decisions it is recommended you seek suitable advice when deciding if this is the right option for you.
A generally quiet Budget overall, although a number of subtle changes mean that many taxpayers’ affairs are set to be simpler; but those seeking to make capital gains in the near future should seek professional advice to make sure they are not caught out as a result of the announcements.