Budget 2016

March 16, 2016

Budget headlines:

  • Rise in Insurance Premium Tax from 9.5% to 10%.
  • No change for pension customers but there are more options for under 40s.
  • Good news for savers.
  • Good news for investors - Immediate reduction to Capital Gains Tax.
  • Family income changes.
budget

Insurance Premium Tax 

Insurance Premium Tax rises by 0.5% from 9.5% to 10% from 1 October 2016 leading to higher premiums for insurances such as car, house and pet insurance. The tax paid on a £50 premium would rise from £4.75 to £5.00. The money raised by this additional 0.5% will be used to enhance flood defences in Leeds, York, Calder Valley and Cumbria and for maintenance of existing defences.

Pensions

  • No change to tax relief on the payments you make to your plan
  • No change from the budget to how much you can pay in to your pension
  • No change to the amount of tax free cash you can take – 25%
  • No change to how you can take your pension fund as an income.
  • To help you with pension decisions, you will be able to take £500 tax free from your pension to pay towards cost of financial advice. This will be introduced at a later date. 

The reasons you may choose to save for your pension are unchanged especially if you are aged 40 or over. 

Savings and Investments 

  • You will be able to save up to £4,000 a year with the government adding 25% to the amount you save.
  • You will be able to use this towards buying a first house with the balance being available from age 60 as pension.
  • Find out more about the proposed new lifetime ISA

If you are aged under 40, you will need to consider what is best for your circumstances and, where you might choose to hold your on-going savings, ahead of the introduction of the Lifetime ISA.

Good news for savers

From 6 April 2017 the maximum you will be able to invest in to an ISA is £20,000 each year.

Tax Changes

Good news for investors - Immediate reduction to Capital Gains Tax

From 6 April 2016 the higher rate of Capital Gains Tax will reduce from 28% to 20% and the basic rate will reduce from 18% to 10%.
If you are thinking about selling an investment which might attract a Capital Gains Tax charge, you should decide whether you want to delay so you can benefit from a lower tax charge.

Changes to family finances

  • The Government has increased the personal allowance to £11,500 and the higher rate threshold to £45,000 from the tax year 2017-18.
  • There is a freeze on fuel duty, and the Government reports this will save the average driver £75 every year compared to pre-2010 fuel duty escalator plans.
  • There is a freeze on duty for beer and most ciders.
  • A new soft drinks industry levy has been introduced to help tackle childhood health. By incentivising companies to reduce the sugar in the drinks they sell, this will help fund a primary schools sports incentive for up to £320 million each year from September 2017.
  • The launch of a new Help to Save scheme for people on low incomes, providing a 50% government bonus on up to £50 of monthly savings, benefiting up to 3.5 million people.

Following the budget statement by the Chancellor of the Exchequer, Zurich's UK chief executives have commented.