The summer Budget delivered by the Chancellor earlier this month could have a significant impact on pensions, savings and investing over the next five years.
During his speech George Osborne said that the Budget recognised “the hard work and sacrifice of the British people over the past five years.” However, for those on a higher income the latest budget could have serious ramifications.
Top earners will see their annual pension savings allowance cut, meaning those that earning more than £150,000 a year will see their allowance taper away to £10,000 by April 2016, down from £40,000.
The amount a person can save within their pension over their lifetime free of tax is also to be cut, from £1.25 million to £1 million, from next April. This lifetime allowance will then increase annually at the rate of inflation from April 2018.
Those who receive dividends from their investment will also be affected as the Dividend Tax Credit will be abolished in April 2016 and a new Dividend Tax Allowance of £5,000 a year will be introduced.
The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
On a more positive note, a family home allowance will be added to the existing £325,000 Inheritance Tax threshold, meaning the total combined tax-free allowance will increase up to £1 million by 2020-21. However, the allowance will be gradually withdrawn for estates worth more than £2 million.
These are just a few of the measures announced in the latest budget, but there could be other issues that affect you and your businesses investments and savings.
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