What you need to know–the main talking points
The Chancellor of the Exchequer, George Osborne, gave his fifth Budget speech to Parliament on 19 March 2014. He unveiled plans to support economic recovery – including tax breaks to boost productivity, exports and manufacturing.
The deficit Mr Osborne announced would be lower than expected this year at 6.6% – and he said the Government was on track to post a surplus of 0.2% in 2018/19, according to the Office for Budget Responsibility (OBR) forecasts.
This was a Budget billed for makers, doers and savers. The changes announced are set to redefine financial planning, with the reforms aimed at boosting savings in the long term. These reforms included the amount people can earn before tax going up by £500 to £10,500. There was an increase to the annual Individual Savings Account (ISA) allowance for 2014/15 from £11,880 to £15,000, from 1 July this year, which will combine Cash and Stocks & Shares allowances into a New ISA (NISA).
The Chancellor announced a series of radical reforms to the pension system, giving people unprecedented freedom over how they draw their pension. From April 2015, anyone who is aged 55 or over will be able to take their entire pension fund as cash – although only the first 25% will be tax-free. The remaining 75% of the fund will be taxed at the saver’s marginal rate.
Pensioners will be able to drawdown as much or as little of their pension pot as they want, anytime they want. No caps. No drawdown limits. No one will have to buy an annuity.
At a glance
New ISA – Cash and Stocks & Shares Individual Savings Account (ISA) to be merged into a single new NISA
Increased ISA allowance – annual ISA allowance to be increased to £15,000 from 1 July 2014
Increased Junior ISA allowance – annual allowance to be increased to £4,000 from 1 July 2014
Pension flexibility – greater access to pension pots and no requirement to buy an annuity.
Savings – 10p tax rate for savers to be abolished from April 2015
NS&I Pensioner Bonds – launch of a choice of two fixed-rate, market-leading savings bonds for over-65s, available from January 2015
Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested.
The Financial Conduct Authority does not regulate Tax Advice, Cash ISAs and National Savings and Investments.
