23rd March 2016 at 4:54pm
As usual, we were busy on Budget day on 16 March to quickly bring you the financial, pensions and tax changes which matter to you.
As part of this, we asked you for your feedback on the Budget and whether you found our blog helpful.
More than 180 of you were quick to reply, and we’re grateful that you took the time to share your thoughts with us – and we want to address the questions you asked.
On a positive note, almost all of you who replied found the blog helpful. We’re glad to hear it.
Many of you are interested in similar topics, with tax and investing at the top of many people’s agenda.
We’ve covered the most common questions you put to us in our Q&A below. You also told us you want us to make complex legislative issues simple. We try our best but we need your feedback to tell us if we’re getting it right, or not. You can give us feedback via the comments section below or on the MoneyPlus Community.
Capital Gain Tax: hands up, we got it wrong
We’d particularly like to thank the three eagle-eyed readers who spotted our error when it came to the Capital Gains Tax cuts.
We try to get our Budget news out as quickly as we can; making sure the information is accurate, informative and relevant. We’re sorry, on this occasion we got it wrong.
We said that the CGT cuts “could mean you’ll pay less tax if you sell shares or a second property, for example.”
Actually, this isn’t true as property isn’t included in this change. We rectified this as soon as we could. You can read our Budget 2016 blog here.
Budget 2016 Q&A: Here’s what you asked us
We answer your questions on savings, investing and tax. You can read our Q&A on pensions and retirement here.
Where can I get help with investing?
We have lots of information to help you, however much you know, or don’t know, about investing.
Our ‘DIY or Delegation’ article is a good starting point – it can help you decide if you want to ‘DIY’ and build your own portfolio, or delegate the decision-making to experts.
If you’re concerned about losing money when you invest, have a look at ‘Why it pays to take a long term view when you’re investing’.
Also, watch out for our regular updates on what’s happening in markets and how these events may have an impact on your investments.
Looking for a bit more detail about how and where to invest?
You might find our blogs on ‘Active or passive investing’ and ‘The importance of diversification and correlation in investments’ useful.
How do I save on tax?
The key to unlocking a tax efficient retirement income is to make sure you have made full use of the available tax allowances. Paying less tax will mean your savings will last longer in retirement and potentially provide a greater legacy for your loved ones.
It’s easy to overlook the tax effect of withdrawals and end up paying more tax for the same net income. The new pension freedoms may be tempting, with access to all your pension once you reach age 55.
But withdrawing all your pension in one go will mean all of your pension income ends up being taxed in a single tax year and could see a large slice of your pension income taxed at 40% or even 45%. If you take it over a number of years some of your income could fall within your tax-free personal allowance or be taxed at 20% rather than 40%.
The Taxing Question About Pension Freedoms covers the mains issues but tax can be complicated, and we recommend you speak to an expert to stay on track.
There have been a lot of changes announced around pensions and tax recently. Our infographic on tax and pension changes also highlights some useful points.
Should I take out a new Lifetime ISA (LISA)?
We’ve had quite a number of questions on this topic and we’re going to address the LISA more fully in an article over the next few days. It merits a piece all on its own.
The new arrival in the savings family, the Lifetime ISA,was announced in the March 2016 Budget.
The Lifetime ISA will be available from April 2017 for those aged between 18 and 40, giving them a new option when it comes to saving for their first home or topping-up their pension savings.
It offers them a new way to save up to £4,000 a year and benefit from a Government bonus of £1 on top of every £4 saved. The bonus takes it up to £5,000 a year.
But there is a sting in the tail if you are considering taking one out, assuming you are eligible to do so (that is, you’ve not yet reached the ripe old age of 40 by April 2017.)
You need to use the proceeds to buy your first home or take your savings after age 60 to be able to keep your bonus and take the proceeds tax-free. Otherwise there’s a 5% exit penalty and charges, as well as a loss of growth on the added bonuses.
There are growing concerns that some younger people will choose a LISA instead of their workplace pension.
Anyone considering this approach should remember that a workplace pension contribution benefits from tax relief as well as an employer contribution, and far more can be put in – up to £40,000 annually.
Compared to an ISA of any kind, a workplace pension is still the most tax-efficient way to save for retirement.
Does Standard Life intend to offer the new Innovative ISA?
We have no current plans to offer the Innovative ISA, but we will be offering the new Lifetime ISA.
You can read about the new Lifetime ISA for the under 40s above and in our March 2016 Budget article. We’ll be looking into this newest member of the savings family in more detail in the coming days.
The information in this blog or any response to comments should not be regarded as financial advice. Information correct as of March 2016. A personal pension is an investment and its value can go up or down and may be worth less than you paid in.