As well as the pension changes, the Budget also announced a new breed of tax-free Individual Savings Accounts, which will allow £15,000 in cash or shares, or a mix of the two, to be invested each year. They’ll be launched in July.
- Check that the charges on the investment ISAs do not outweigh the tax benefits. Remember there will be no tax to pay on gains up to £10,900 even outside an ISA wrapper.
And if you want to play safe with a cash ISA remember that banks like to lure in savers with high rates for the first year and then drop them dramatically at the end of the period. Or they encourage people to tie their money up for several years when the likelihood is that interest rates will rise and savers will lose out.
Consider all the options
Those with modest incomes might be better with an ordinary savings account. The 10p tax rate for savers will not be scrapped until April 2015. This rate applies to those whose savings income is £2,880 or less above the personal allowance. In 2013-14 the personal allowance is £,9,440. From April 6 it will be £10,000.
Savings accounts usually deduct tax at 20%, so you have to ask your bank or building society for the lower rate and may have to contact HMRC. You are unlikely to be offered this. You have to apply. (Make sure you go direct to HMRC online and don’t get snared in some of the bogus websites out there. You can use the link above.)
New allowance for tax free savings
From April 2015 there will be a new £5,000 allowance for tax-free savings. The personal tax allowance will be £10,500 and if total income from savings and earnings is less than £15,500 then you can apply for tax-free savings.
Air passenger duty
If you’re planning ahead for holidays, the Air Passenger Duty (APD) on long haul flights is being reduced from April 2015 and will save £26 per person. In the meantime if you have to cancel a long haul flight and have paid the tax, apply to the airline or travel company for a refund of the APD. Some add an administration charge that is equal to the tax but others play fair. Check first!
Pothole damage claims
Local authorities are to get £200m to fix potholes. If your car is damaged by potholes, take pictures and challenge the council to pay for the damage. Most councils keep a log of complaints about potholes that will establish they knew about the poor state of the road and will pay up.
Help to Buy
Help to Buy is extended until 2020, which allows would be home buyers time to build up a deposit using tax-free ISAs or other savings. It also gives buyers the chance to make sure that their credit history is sparkling clean when they come to apply for a loan.
Tax returns will begin to be sent out in a couple of weeks’ time. They have never been more important. Fill them out accurately in good time. HMRC has new powers to claim tax first and ask questions later in its battle against tax evasion and tricky tax avoidance schemes, but there are fears that people who have genuine reason not to pay an inflated tax bill could find they will have to pay first and then argue.
It has never been more important to keep good records of any gifts to family, investments, sale of second homes or foreign bank accounts.