Autumn Statement 2014 – Personal tax and investment

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Photo Credit: MacBeales via Compfight cc

Personal allowance and higher rate threshold to increase from April 2015

The personal allowance for those born after 5 April 1948 will increase to £10,600 and the higher rate threshold will increase to £42,385 for 2015-16.

It was also announced that the:

i)      Blind person’s allowance, married couple’s allowance and the income limit will be increased in line with the retail prices index.

ii)     National insurance upper earnings and upper profits limits will be increased in line with the higher rate threshold.

iii)    The government’s new goal is to raise the personal allowance to £12,500.

2. ISAs: transfer to spouses on death and subscription limit

When an individual who has an individual savings account (ISA) dies, their spouse or civil partner will receive an additional ISA allowance equal to the value of the deceased’s ISAs. ISA status ends on the account holder’s death. It appears that this will still be the case in relation to the deceased’s own ISAs, but that the surviving spouse or civil partner will be able to use the additional allowance in relation to their own ISAs, regardless of whether they have inherited the funds in the deceased’s ISAs. This measure will apply in relation to deaths on or after 3 December 2014, but the surviving spouse or civil partner’s allowance will only be increased from 6 April 2015.

On 6 April 2015, the ISA subscription limit will increase to £15,240 and the junior ISA limit to £4,080. The current limits are £15,000 and £4,000 respectively.

3. Remittance basis charge to increase

The annual charge paid by some non-UK domiciled but UK resident individuals who use the remittance basis of taxation is to increase from April 2015. The charge for those who have been UK resident for at least seven out of the nine tax years before the relevant tax year will remain at £30,000. The charge for those who have been UK resident for at least 12 out of the previous 14 tax years will increase from £50,000 to £60,000. There will be a new charge of £90,000 for those who have been UK resident for at least 17 out of the previous 20 tax years.

The government will also consult on making an election to use the remittance basis effective for a minimum of three years, so as to prevent taxpayers from arranging their affairs so as to only pay the charge occasionally. Eligible taxpayers can currently make an election for a specific tax year. If introduced, this measure would also make it more difficult for taxpayers to assess whether it would be beneficial to claim the remittance basis for any given period.

4. Further consideration of the personal allowance restriction for non-residents

There will be continued discussion about the proposal to restrict the income tax personal allowance for non-residents. A more detailed consultation will be undertaken if the government decides to proceed, although no changes will be introduced before April 2017.

5. CGT: online calculator

The government is to provide an online calculator that will allow taxpayers to calculate their chargeable gains for capital gains tax (CGT) purposes. Taxpayers will also be given the opportunity to pay any CGT liability ahead of the self assessment due date. This may be attractive to those who are concerned that they may otherwise spend their tax liability, and the policy costing anticipates that a number of taxpayers will indeed take up this option. This facility will be available from October 2016.

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