You are here: AdviserArchive: March 2016

Archive: March 2016

This page is for Professional Financial Advisers only Latest from Cofunds - week commencing 21 March 2016
The Annual Allowance and Lifetime Allowance for pensions is changing

The Annual Allowance and Lifetime Allowance for pensions are changing

The Lifetime Allowance is being reduced from £1.25 million to £1 million. In addition to this, High-income individuals will have a lower Annual Allowance.

Find out more here

A tax-free Dividend Allowance will replace the Dividend Tax Credit

A tax-free Dividend Allowance will replace the Dividend Tax Credit

A tax-free Dividend Allowance of £5,000 will replace the current Dividend Tax Credit.

You can read more here

A Personal Savings Allowance is being introduced

A Personal Savings Allowance is being introduced

Basic-rate taxpayers will be able to earn up to £1,000 in savings income tax-free. Higher-rate taxpayers will be able to earn up to £500.

Find out more here

Scottish rate of Income Tax

Scottish rate of Income Tax

Under new legislation, those living in Scotland will pay the Scottish rate of Income Tax which is 10%. However the same overall rate of Income Tax as those in the rest of the UK will still apply.

Find out more here

Abolition of the Tax Deduction Scheme for Interest

Abolition of the Tax Deduction Scheme for Interest

The Tax Deduction Scheme for Interest (TDSI Payments) will be switched off as of the 6th April 2016. However, Cofunds is not impacted by this as it is not a Deposit Taker.

Find out more here

Corporate actions

Corporate actions

View details of recent and upcoming corporate actions

View the latest corporate actions here

The Annual Allowance and Lifetime Allowance for pensions are changing

The Annual Allowance and Lifetime Allowance for pensions are changing from 6 April, 2016.

These changes are particularly important if your clients:

  • Receive income (including pension contributions) of more than £150,000 in a year; or
  • Expect to have pension savings in excess of £1 million.

Changes to the Annual Allowance

The current Annual Allowance is £40,000, however, if your client's income is more than £150,000 a year, the allowance will be reduced by £1 for every £2 of income over this amount - up to £210,000. Where income is over £210,000 a year, the Annual Allowance will be £10,000.

The Money Purchase Annual Allowance is remaining at £10,000.

Changes to the Lifetime Allowance

The total value of pension savings per person, without incurring a tax charge, is being reduced from £1.25 million to £1 million.

Two new forms of pension protection are being introduced:

  • Fixed Protection 2016
  • Individual Protection 2016

You can read more in our fact sheet.

A tax-free Dividend Allowance will replace the Dividend Tax Credit

A tax-free Dividend Allowance of £5,000 will replace the current Dividend Tax Credit. This means that the first £5,000 of total dividend income received in the tax year will be tax-free. The allowance is available to anyone who has a dividend income.

This change will be reflected in your clients' 2016/17 Consolidated Tax Voucher.

This change does not affect Interest Distributions, which will continue to be taxed at 20%.

Your clients will pay tax through their tax return on any dividends received over £5,000 at the following rates:

  • 7.5% on dividend income within the basic rate band
  • 32.5% on dividend income within the higher rate band
  • 38.1% on dividend income within the additional rate band

Dividends received by pension funds that are currently exempt from tax, and dividends received on shares held in an Individual Savings Account (ISA), will continue to be tax-free.

View the helpful factsheet on the government website here.

A Personal Savings Allowance is being introduced

Basic-rate taxpayers will be able to earn up to £1,000 in savings income tax-free. Higher-rate taxpayers will be able to earn up to £500. Non- taxpayers will still be entitled to reclaim any tax deducted at source from their income.

Your clients will be responsible for managing their own tax with regard to this allowance.

View the helpful factsheet on the government website here.

Scottish rate of Income Tax

From 6 April 2016, those living in Scotland will pay the Scottish rate of Income Tax.

Whilst those living in Scotland will pay the same overall rate of Income Tax as people in the rest of the UK, some of the Income Tax received will be paid to the Scottish Government.

This applies to wages, pension and most other taxable income.

Your clients' personal allowance remains unaffected and they'll also pay the same tax as the rest of the UK on dividends and savings interest.

View the helpful factsheet on the government website here.

Abolition of the Tax Deduction Scheme for Interest

The Tax Deduction Scheme for Interest (TDSI Payments) will be switched off as of the 6th April 2016. However, Cofunds is not impacted by the abolition of the Tax Deduction Scheme for Interest as it is not a Deposit Taker.

Therefore, Cofunds will continue to deduct tax at source on interest paid on certain cash accounts, on rebates and on compensation payments as it is obliged to under Tax Regulation.

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