Autumn Statement 2015: Tax changes for savers and investors

Autumn Statement 2015

Budget 2015

MoneyPlus Features Team

27th November 2015 at 3:39pm

The Autumn Statement on 25 November didn’t contain any major tax or pension shake ups, but it rounds off a year that has seen two big changes that will come  in April 2016 –  bringing tax savings and simplicity for many taxpayers and giving some the opportunity to get income up to £33,100 tax free. (See our graphic here for details.)

 

Table of tax free allowances

What’s new? The two biggest changes bring tax savings and simplicity for many taxpayers but also highlight the important role tax planning can play. These are the new £5,000 dividend allowance and new personal savings allowance of up to £1,000.

New £5,000 dividend allowance

The first big change is the new £5,000 dividend allowance, with the table below showing the rate of tax an investor has to pay on their dividends now and how this will change in the 2016-17 tax year.

Table of taxpayer rates

Dividend allowance: Winners and losers

There will be both winners and losers when the £5,000 annual dividend allowance is introduced next April. The majority of basic rate taxpayers will see no difference as the dividend money they get won’t be enough to go above £5,000 to trigger tax. Higher rate taxpayers could be better off by up to £1,250 a year (£1,530 for additional rate taxpayers) but some basic rate taxpayers could be worse off by as much as £2,025.

Do be careful as the £5,000 allowance will be granted automatically and the onus is on you to tell HMRC and pay the appropriate rate of tax if your dividend income is higher than £5,000.

New personal savings allowance of up to £1,000

The other major change is the new personal savings allowance. For most people with deposit savings, this means an extra tax-free allowance – £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Additional rate taxpayers don’t get an extra allowance.

What could the tax changes mean for you?

Using these new tax-free allowances efficiently could mean you benefit from a sizeable tax free income of up to £33,100.

Is it right for you?

People save for different reasons and structuring your assets around tax may not necessarily be best for you. It’s all about having the right investments in place to make the most of the tax benefits.

There may be costs to consider if you do, for example stockbroker fees, which could limit the benefits of this approach.

For those with complex finances, it’s well worth taking advice, especially as it’s likely there will be more changes on the way in the 2016 Budget. The savings you could make can more than offset the cost of that advice.

That’s it for this Autumn Statement update – post below if you have any questions.

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The information in this blog or any response to comments should not be regarded as financial advice. A Stocks and Shares ISA and a personal pension are investments. Their value can go up or down and may be worth less than you paid in. Laws and tax rules may change in the future. The information here is based on our understanding in November 2015. Your personal circumstances also have an impact on tax treatment.

No guarantees are given regarding the effectiveness of any arrangement entered into on the basis of these comments.