As of today (1 July 2014), the personal allowance limit on contributing to an ISA increases to £15,000 for the tax year 2014/15. Continue reading
The main tax allowances for 2014/15 have increased to the following amounts:
Individual Personal Tax Allowance: £10,000
Individual Personal Tax Allowance for those who were born between 6 April 1938 and 5 April 1948: £10,500
Individual Personal Tax Allowance for those who were born before 6 April 1938: £10,660
So the personal tax allowances for all ages are starting to come into line and the idea is to increase the general personal allowance to £10,500 so there may not be any age advantage at some point in the future.
There are some big changes to ISA limits in the 2014/15 tax year. In particular ISAs will change with effect from 1 July 2014 both in the amount you can save and the way you can save it.
So in general the ISA limit from 6 April 2014 is that you can pay £5,940 into a cash ISA and the total amount you can pay into both stocks and shares, and your cash ISA is £11,800.
Then on 1 July 2014 the name will change to a New Individual Savings Account (NISA) and the combined limit on cash and stocks and shares NISAs is £15,000 – this amount includes any money that you have paid into your old ISAs after 6 April 2014.
All old ISAs will be renamed NISAs from 1 July but cash and stocks and shares can be held within the same NISA.
The government has announced a further increase in the rate of the personal allowance, the amount that any individual can earn before having to pay tax on their earnings. The personal allowance will increase to £10,500 per annum with effect from April 2015, an increase of £500 from the rate of £10,000 per annum which comes into effect on 6 April 2014.
In addition to this, as previously reported, couples will be able to transfer £1,000 of their personal allowance to a spouse if they do not use it all, thus giving another possible saving of £200 a year to couples.
In the last few years the personal allowance has increased above the rate of inflation to the rate of £10,000 a year. This has taken a large number of, in particular, low earners out of the taxpaying system. However, it has now been mooted that the personal allowance should be increased again up to £12,500 per annum.
There are obviously plus points to increasing the personal allowance to this level and more people will end up not paying any tax at all. But there are also a few disadvantages:
Charity donations: at present, any donations that are made to charity can also claim a tax rebate if the person making the donation claims gift aid. However, they can’t do this if they don’t pay the equivalent amount of tax.
Pensions: When the government brought in auto-enrollment to company pension schemes, individuals were enrolled if they more than the personal allowance, therefore if the personal allowance is increased then less people will be enrolled automatically in company pensions. This is bad news as low earners are less likely to enroll by themselves.
However, obviously in these hard times any increase in take home earnings is welcome, particularly for low earners and so most people welcome the increase in the personal allowance.
The chancellor George Osborne confirmed in his autumn statement that the state pension age will rise to 70 for the under 30′s. The SPA has already been slowly rising for those over 30 to increase it from the old standard of 60 for women and 65 for men which went by the board when the pension ages were equalised for men and women. There are now stepped pension ages for those coming up to retirement in the next few decades.
Although this may strike some as a hard blow that they have to wait much longer in order to claim their state pension, in our view it is an inevitable progression and will likely rise even higher as time goes on. It seems impossible that pension ages will not increase further due to factors such as:
- the increase in life expectancy
- the cost of providing ever larger numbers of pensioners with this state benefit
- the demographics of the population making the number of pensioners in relation to those under the state pension age much higher
The increase in state pension age will mean that most people will have to work longer before receiving the benefit. However, for a lot of people these days, working past 65 is not so much of a chore as people live longer lives, are healthier and don’t actually want to stop working at that age as they are fully capable of carrying on for much longer.
65 today is possibly considered similar to 55 a few decades ago both in terms of health and life expectancy. Not only that but people are also needing to work longer due to financial reasons and so cannot actually afford to retire.
One good thing about working for longer is that people are able to build up a bigger pension pot for themselves to give them a better retirement income. The key is to start building up this fund as soon as possible so that the benefit of compound interest can be gained over a longer period. Also annuity rates at an older age will be better so that more income can be gained from the same pot of pension funds (although it is debatable that in a few decades time due to increased life expectancy annuity rates will decrease to similar levels that you might find for younger ages now).
If you want to find out when your state pension age is then the Government provide an online calculator that can tell you either the age that you will be able to take your state pension and/or the amount that you can expect to receive.
Just enter your date of birth and gender and it will tell you your State Pension Age.
David Cameron has announced a new change to the personal allowance for married couples from 2015.
The change will benefit couples where one half is paying tax at the basic rate (but not higher) and the other half has some unused personal allowance (i.e. they will be earning less than £10,000).
The person who is not using all of their personal allowance is able to transfer over up to £1,000 of it to their other half to use. This will give a benefit of £200 to the person paying the basic rate tax (20% of the £1,000).
So if you are not earning enough to take up your full personal allowance then you need to look into transferring this to your husband or wife so that they do not need to pay as much tax from 2015. You will have to apply online to use this transferable tax allowance but not only is it available to married couples it is also available to civil partnerships.
UKIP have put together a proposal for a higher rate of the UK personal allowance (£13,000) that would also be transferable between husband and wife, as well as a flat rate tax of 25% for all.
This would be paid for by scrapping various other current UK policies including overseas aid. Further info can be found on the Money Marketing website.
If you are on a low income then you may be entitled to working tax credit from the government to top up your earnings. You do not have to have children to qualify for working tax credit as there is credit available to you if you work a minimum number of hours a week and also earn below a certain threshold.
If you are single and work more than 30 hours a week and your income is less than £13,000 a year (for 2013/14) then you may be entitled to working tax credits. If you are part of a couple or you have children then the earnings limits are higher than this.
Check out if you are entitled to working tax credits at the HMRC website. Many people do not realise that they are entitled to this which could make all of the difference in enabling you to pay your bills etc.
David Cameron has confirmed that he will put on the table a proposal for a new married couple’s tax allowance before the next general election.
The previous married couple’s allowance was abolished by Labour’s Gordon Brown in 1999 but David Cameron wishes some kind of new allowance to be introduced to help in particular those couples where one party works and the other does not – the allowance would be transferable. It was set out in the Conservative Party manifesto and David Cameron wants to stick to this promise, even though the Liberal Democrats are against it.
Get further info on the Daily Mail website.