Autumn Statement: Pension and Tax Rate Changes

Income Tax Allowances
The standard personal allowance will increase from £10,000 to £10,600 on 6 April 2015, but the personal allowances for those born before 6 April 1938 are frozen. From 6 April 2015 married couples and civil partners will be able to transfer £1,060 of their unused personal allowance to their spouse/ partner, if the recipient is taxed at no more than the basic rate for the year (20%).

Tax Rates
The income tax rates for 2015/16 on earnings and dividends are the same as apply in 2014/15. However, the savings rate is reduced from 10% to zero and the savings rate band is increased to £5,000. The savings rates only apply if the individual’s net non-savings income does not exceed the savings rate limit.

Pensions
The Chancellor announced in September 2014 that the “death tax” on undrawn pensions, set at 55% of the value of the pension fund, would be removed from 6 April 2015 where the deceased was aged under 75. Where the deceased was aged 75 or more the undrawn pension fund is taxed in the hands of the beneficiary (usually the surviving spouse) at their marginal rate of tax, or at 45% where the fund is taken as a lump sum.

Those tax changes would not apply where the pensioner had already bought an annuity with his pension fund, leaving the surviving spouse worse off. From 6 April 2015 where the pensioner dies before age 75 and had purchased a joint life annuity or guaranteed term annuity to provide for the spouse, further payments from the annuity made after the death of the pensioner will be tax free.

Non-domiciled
The Government likes to welcome foreign-born individuals to the UK, especially if they are very wealthy. Such individuals have a special tax status, which is almost unique to the UK, called “non-domiciled”. Even though the individual is resident for tax purposes in the UK their non-domiciled status allows them to keep their overseas income and gains outside of the UK tax net, such that it is only taxed when it is brought into the UK. This tax arrangement is called the remittance basis.

To take advantage of the remittance basis the non-domiciled person must elect to do so, and pay an annual charge which varies according to how long they have been living in the UK:

- 7 out of last 9 tax years: £30,000
– 12 out of last 14 tax years: £50,000 to be increased to £60,000
– 17 out of last 20 tax years: £90,000 (new charge)