It might be a potential gain for you, but also for them?

01 November 2016

There have been many tax changes this year (2016/2017), and we have detailed these on our website and blogs before. Many appear to some as overly generous, such as the new £5,000 gross pa tax free dividend allowance and the £1,000 gross pa tax free savings interest allowance. Some have queried the 'generosity' of the HMRC in making these changes, in some ways making the use of ISAs a little less valuable (we still advocate the use of ISAs to avoid any doubt!). But is there another motive for the HMRC?

At an excellent presentation we attended in September, it was noted that the move by HMRC to digital tax returns (coming soon) has the potential to swamp their system as it rolls out from this year. If, by making the example changes above (and a few others), it takes tens of thousands (if not millions) out of the tax return process altogether, because they no longer need to declare low levels of interest or dividends, all the better for both parties. Taking these further, even small businesses will have their returns digitised by 2020.

More detail on these plans can be found here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/413975/making-tax-easier.pdf

To be slightly cynical, this could then lead to a suggestion that these tax advantageous changes may have a 'shelf life', hence the reason for noting the use of ISAs each year.

Moving on to ISAs, the range of ISA arrangements available has extended out significantly over the years.

The standard Cash ISA and Stocks & Shares ISA are well known, and with cash deposit rates falling to historic low levels, this is not always for positive reasons. Some of the new (and planned future) ISAs are not so well known and we have detailed these below, along with some helpful links:

  • Help To Buy ISA

Those saving to buy their first home can save into a Help to Buy ISA and the Government will boost these savings by 25%. There are a number of conditions attached to the Help to Buy ISA, as you would expect, and details can be found here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/413899/Help_to_Buy_ISA_Guidance.pdf

  • IF ISA

IF stands for Innovative Finance, which in itself can import investment risk. The IF ISA was introduced from April 2016 and will allow individuals to use some or all of their annual ISA allowance to lend funds through peer-to-peer lending. Draft legislation on allowing investors to hold debt securities offered via a crowdfunding platform within an IF ISA has been published for consultation and can be viewed here:

https://www.gov.uk/government/publications/draft-legislation-innovative-finance-individual-savings-account-and-debt-based-crowdfunding


  • Lifetime ISA (planned for April 2017)

For those aged between 18 and 40, although there has been some questioning as to the viability of this option.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508117/Lifetime_ISA_explained.pdf

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The new Chancellor's Autumn Statement is on 23 November 2016 and it will be interesting to see how he makes his mark within the new administration of the Government.

The options above and the many rules surrounding pensions create the usual investment conundrum of Pension versus ISA: which is better? The most appropriate answer to this is to seek financial advice to see which will best match your circumstances, although you may find that it a combination of the two options if affordable. The maximum annual contribution into an ISA is increasing to £20,000 (from £15,240) from 06 April 2017.

We will aim to keep this website fully updated as we hear of any changes made or planned.

Vicky Fulcher Dip PFS
Financial Planner

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