18th August 2015 at 3:25pm
Here’s how the Summer Budget could affect your savings and tax for 2016.
Pensions: high earners most affected
As had been trailed in the March Budget, those with an income over £150,000 won’t be able to pay as much into their pension and get the same tax relief top-up. From next April, the £40,000 annual allowance will be gradually reduced to just £10,000 when your income reaches £210,000.
The lifetime allowance – how much you can build-up in your pension – is being cut from £1.25m to £1m from April 2016. Transitional arrangements are expected to help you if your pension savings are already near or above this.
The Chancellor also announced a consultation into the future shape of pensions.
Tax-free income up to £17,000
From next April, £17,000 of your income could be tax-free.
The tax-free personal allowance increases to £11,000. There will also be a new, tax-free dividend allowance of £5,000 for investments and a new personal savings allowance of £1,000, which means bank and building society interest earned up to this amount is tax-free for basic rate taxpayers. Higher rate taxpayers could have up to £16,500 tax-free, as their personal savings allowance is £500 rather than £1,000.
There are many moving parts of the tax and savings jigsaw. We’ll revisit these in more depth in future.
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 July 2015. Your personal circumstances also have an impact on tax treatment.