Budget 2010: Personal wealth and savings
THE BUDGET held few surprises overall on personal tax, savings and wealth, although there was a raft of measures to effect the better-off.
The Chancellor confirmed that tax allowances for those earning over £100,000 would be gradually removed, and that the inheritance tax threshold frozen for four years.
The limits for cash and share ISAs will increase annually in line with inflation, he announced, following the last Budget’s announcement that limits would be increased.
The move is hailed as a way of alleviating the plight of savers living off their life savings, who have seen savings rates plummet along with the Bank of England base rate over the past year.
The overall limits for Isas will rise to £10,200 from £7,200 on April 6, as announced in last year’s Budget, of which half can be contained in a cash ISA and the remainder in shares.
The increases will result in an annual rise of a few hundred pounds in the overall limit in April 2011. The indexation of the Isa allowance will be based on the Retail Price Index (RPI).
Daniel Hartland, tax partner at Grant Thornton in Birmingham said: “”Investors will be relieved to see that capital gains tax rates have been held at 18% for the time being. There is widespread speculation, however, that this may not be the case following any post election Budget, given the significant difference in rates of tax on capital and income following the introduction of the 50% tax rate.
“We are currently advising a number of investors with regard to the acceleration of gains to take advantage of the current favourable rate and this is likely to continue over coming months as uncertainty remains.
“The removal of higher rate relief for pension contributions and the increase in tax rates to up to 50% mean that going forward investors will need to reconsider their long term investment strategy and take much more interest in the tax consequence of making investments.
“It is now more important than ever that individuals seek tax and investment advice at an early stage as the markets start to recover to ensure that future returns are not eaten up by the tax take. For example, I am currently advising a client who invested in a similar asset with two separate providers, but suffered income tax on one return at 40% and capital gains on the other at 18%. This is a reflection of the increasing complexity of the UK tax system.”
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