Autumn Statement 2015 – what it means for you and your money

Autumn Statement 2015

Budget 2015

Julie Hutchison

25th November 2015 at 5:03pm

The Autumn Statement 2015 sets the scene for tax allowances and limits which apply to your savings and investments from 6 April next year. Here’s what you need to know from today’s statement and other recent announcements.

You could pay less income tax

Unless you’re on a high income, you’ll keep more of what you earn with changes to income tax from 6 April 2016. The starting point for income tax goes up from £10,600 to £11,000. The 20% income tax band will apply for income up to £43,000 for most people.

Together these mean you could be up to £280 a year better off.

Tax-free bank and building society interest

In a further boost to your savings, cash in accounts at banks and building societies will no longer have 20% tax deducted at source from 6 April 2016. This means, for example, £80 of interest remains £80 when it is paid to you, instead of having 20% in tax taken off.

A £1,000 tax-free band is also being introduced for basic rate taxpayers so the first £1,000 of interest you receive won’t be liable for tax. If you get more than this, then tax will be due on the excess and you’ll have to do a self-assessment tax return. Higher-rate taxpayers will have a lower, £500 tax-free band.

Pension changes

There are some big changes happening in the pensions world but these will only affect you if you have a very large pension pot or pay 45% tax.

If this doesn’t apply to you, it’s business as usual when it comes to your pension savings.

ISA allowances confirmed

From 6 April 2016, the amount that can go into an ISA stays at £15,240 for adults and £4,080 for children. This can be used for stocks and shares, cash, or both.

With low interest rates, now could be a good time to review your Cash ISA and consider whether you’re ready to start investing with a Stocks & Shares ISA. You have to be ready for some ups and downs with the stock market, but there is the potential for better long-term growth so your money could work harder for you.

Remember that you can have both a Cash ISA and a Stocks & Shares ISA, so it’s not all or nothing.

New £5,000 share dividend allowance

If you have shares outside an ISA, the new £5,000 tax-free dividend allowance coming in from 6 April 2016 will affect you.

The good news is you’ll no longer pay income tax on dividend income up to £5,000.

If you have a larger share portfolio, the slice of dividend income above this will be taxed at:
• 7.5% (basic rate)
• 32.5% (higher rate)
• 38.1% (additional rate).

If you have dividend income above £5,000 you will have to do a self-assessment tax return even if you are still a basic rate taxpayer as the current 10% tax credit is being abolished.

New state pension rate confirmed

The new flat-rate state pension coming in for those reaching state pension age after 5 April 2016 has been set at £155.65. You’ll find more information about the new state pension here.

For those who already get the state pension, the basic pension will increase to £119.30 from next April, an increase of £3.35 a week.

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

For more information read our other blog here.

 

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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.