Budget 2014 – are you better off?
Thursday, March 20, 2014
With the UK's economy showing signs of recovery, and a general election just over a year away, everyone was expecting Chancellor George Osborne to be a little more generous with this year's Budget - and he didn't disappoint. There's plenty of good news for taxpayers, savers and pensioners…
To find out how your finances could be affected, we've summarised six key points:
1. More brass in pocket
As already revealed, the income tax allowance will increase to £10,000 from April 2014, with Osborne announcing a further increase to £10,500 from April 2015.This April's increase will put an extra £112 a year into the pockets of many basic rate taxpayers, with the allowance for 2015/16 adding a further £100 next year.
2. ISAs will be even NISA
As well as increasing the annual allowance to £15,000 from July, the Chancellor announced that cash and stocks & shares would be merged to create a New ISA, or NISA. The increase in the allowance means you'll be able to squirrel away a further £3,480 a year - equivalent to £290 a month - into a tax-efficient ISA. This is particularly good news if you only used your cash ISA allowance in the past, as you'll see the amount you can save increase from £5,760 to £15,000 from July. Additionally, with the relaxation of the rules around transfers, you'll be able to move your money between cash and stocks & shares ISAs as you want.
3. Allowance boost for kids' savings plans
The Junior ISA and Child Trust Fund allowance is set to increase to £4,000 a year from July, allowing family and friends to save an additional £280 a year towards a child's future. There is also good news for working parents in the form of a childcare subsidy worth up to £2,000 - a benefit that will apply to each child under 12 from autumn 2015. Under this scheme, working couples will be able to open a 'tax-free childcare' account and any money paid into them will receive a 20% subsidy from the Government. The accounts can be used to pay any registered child carer.
4. Tax-free savings to benefit lower income households
From April 2015, the 10% savings tax will be abolished, benefitting low-income savers. Additionally, the government will raise the amount of savings the 0% rate applies to from £2,880 to £5,000. This will mean that if you have a total income of less than £15,500 (the £10,500 personal income tax allowance plus the £5,000 savings allowance), you'll be able to register for tax-free savings.
5. Pensions made easy (well, easier!)
Radical reforms will enable more people to take their pensions as cash rather than having to buy an annuity. Further consultation is expected but the changes already announced - and effective from 27th March 2014 - will allow anyone with a pot worth less than £10,000 or those with total pension savings of less than £30,000 to take it as a lump sum.
6. Tax cuts for treats
As well as helping savers and pensioners, the Chancellor also showed his softer side with a number of tax cuts on life's little pleasures. Beer duty was cut by 1p a pint while the duty on spirits and ordinary cider was frozen. Motorists also benefitted with September's planned fuel duty rise cancelled.
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