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    • Former MSE Helen
    • By Former MSE Helen 2nd Apr 15, 5:22 PM
    • 2,324Posts
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    Former MSE Helen
    MSE News: It's the start of the new financial year: Here's what's changing
    • #1
    • 2nd Apr 15, 5:22 PM
    MSE News: It's the start of the new financial year: Here's what's changing 2nd Apr 15 at 5:22 PM
    From today a host of changes take force, including new pension freedoms, new ISA allowances and new tax rates...

    Read the full story:

    It's the start of the new financial year: Here's what's changing




    Click reply below to discuss. If you havenít already, join the forum to reply. If you arenít sure how it all works, read our New to Forum? Intro Guide.

Page 1
    • RobertinHerts
    • By RobertinHerts 6th Apr 15, 10:09 AM
    • 208 Posts
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    RobertinHerts
    • #2
    • 6th Apr 15, 10:09 AM
    Bank account taxation & Pension inheritance rules
    • #2
    • 6th Apr 15, 10:09 AM
    Two other changes to the regulations which I heard mentioned on the radio this morning. Clarification would be useful thanks:

    1. Tax on Bank accounts abolished. So surely the interest now paid tax free on some current accounts is superior to having an ISA?

    2. Ability to inherit a Pension as a transfer rather than having it cashed.

    Thanks in advance, Robert
    Last edited by RobertinHerts; 06-04-2015 at 10:16 AM.
    • zagfles
    • By zagfles 6th Apr 15, 10:21 AM
    • 14,913 Posts
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    zagfles
    • #3
    • 6th Apr 15, 10:21 AM
    • #3
    • 6th Apr 15, 10:21 AM
    Two other changes to the regulations which I heard mentioned on the radio this morning. Clarification would be useful thanks:

    1. Tax on Bank accounts abolished. So surely the interest now paid tax free on some current accounts is superior to having an ISA?
    Originally posted by RobertinHerts
    This is rubbish. Well not this tax year anyway. It was announced in the budget that it would apply from 2016/17 tax year but it's not been legislated for so it could be dropped by the new govt.
    2. Ability to inherit a Pension as a transfer rather than having it cashed.

    Thanks in advance, Robert
    That has always been an option for dependants, now it's an option for anyone. Taxed at the beneficiary's marginal rate if the pensioner died over 75, tax free if under 75.
    • RobertinHerts
    • By RobertinHerts 6th Apr 15, 10:35 AM
    • 208 Posts
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    RobertinHerts
    • #4
    • 6th Apr 15, 10:35 AM
    • #4
    • 6th Apr 15, 10:35 AM
    That has always been an option for dependants, now it's an option for anyone. Taxed at the beneficiary's marginal rate if the pensioner died over 75, tax free if under 75.
    Originally posted by zagfles
    Thanks zagfles.

    Is it handled by the executor? Or does the Pension company need to be notified in advance or Will revised?
    • Alter ego
    • By Alter ego 6th Apr 15, 10:45 AM
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    Alter ego
    • #5
    • 6th Apr 15, 10:45 AM
    • #5
    • 6th Apr 15, 10:45 AM
    No mention of the ability to transfer £1060 personal tax allowance to a spouse - for non tax payers.
    Perhaps HMRC will now begin to implement it as the 2015/16 tax year has arrived. They have been kind enough to allow me to register my interest in the scheme and said they will email me when they get round to it!
    Loose means not tight, Lose means something is lost, simples no?
    Ignore me if you like, it's not the real me anyway.
    • zagfles
    • By zagfles 6th Apr 15, 10:48 AM
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    zagfles
    • #6
    • 6th Apr 15, 10:48 AM
    • #6
    • 6th Apr 15, 10:48 AM
    Thanks zagfles.

    Is it handled by the executor? Or does the Pension company need to be notified in advance or Will revised?
    Originally posted by RobertinHerts
    Depends on the pension, they can't usually be left in wills which is better in most cases as they then aren't subject to IHT. Most have an "expression of wish" form the pensioner needs to fill in.

    Note that this only applies to drawdown type pensions, or uncrystallised money purchases pensions, not annuities already in payment or occupational DB pensions. They might provide spouse/dependant children benefits but that would be it usually.
    • zagfles
    • By zagfles 6th Apr 15, 10:51 AM
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    zagfles
    • #7
    • 6th Apr 15, 10:51 AM
    • #7
    • 6th Apr 15, 10:51 AM
    No mention of the ability to transfer £1060 personal tax allowance to a spouse - for non tax payers.
    Originally posted by Alter ego
    This can be useful for taxpayers in some circumstances (eg to get tax free interest)
    • Alter ego
    • By Alter ego 6th Apr 15, 10:56 AM
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    Alter ego
    • #8
    • 6th Apr 15, 10:56 AM
    • #8
    • 6th Apr 15, 10:56 AM
    This can be useful for taxpayers in some circumstances (eg to get tax free interest)
    Originally posted by zagfles
    Sorry I think we're at cross purposes. Only non tax payers can transfer to their tax paying spouse.
    Loose means not tight, Lose means something is lost, simples no?
    Ignore me if you like, it's not the real me anyway.
    • zagfles
    • By zagfles 6th Apr 15, 11:04 AM
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    zagfles
    • #9
    • 6th Apr 15, 11:04 AM
    • #9
    • 6th Apr 15, 11:04 AM
    Sorry I think we're at cross purposes. Only non tax payers can transfer to their tax paying spouse.
    Originally posted by Alter ego
    No, anyone can provided they don't pay higher rate tax.

    In most cases, if both are basic rate taxpayers, it would be pointless as it would save no tax. But in some situations it would. For instance if one spouse had earned income of £16k plus £500 interest, and the other spouse £26k. Normally the £500 interest would be taxed.

    But if the higher paid spouse transfers the £1060 of their allowance to lower paid spouse, the £500 interest would be tax free.
    • Alter ego
    • By Alter ego 6th Apr 15, 11:07 AM
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    Alter ego
    No, anyone can provided they don't pay higher rate tax.

    In most cases, if both are basic rate taxpayers, it would be pointless as it would save no tax. But in some situations it would. For instance if one spouse had earned income of £16k plus £500 interest, and the other spouse £26k. Normally the £500 interest would be taxed.

    But if the higher paid spouse transfers the £1060 of their allowance to lower paid spouse, the £500 interest would be tax free.
    Originally posted by zagfles
    Thanks for the clarification, let's hope HMRC get on the case now.
    Loose means not tight, Lose means something is lost, simples no?
    Ignore me if you like, it's not the real me anyway.
    • AlwaysLearnin
    • By AlwaysLearnin 6th Apr 15, 2:32 PM
    • 613 Posts
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    AlwaysLearnin
    The person transfering part of their allowance must have income under the PA:

    https://www.gov.uk/marriage-allowance
    • zagfles
    • By zagfles 6th Apr 15, 3:36 PM
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    zagfles
    The person transfering part of their allowance must have income under the PA:

    https://www.gov.uk/marriage-allowance
    Originally posted by AlwaysLearnin
    Nope. As usual the gov.uk noddy guide oversimplfies things.

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/294190/OOTLAR_19_March_2014__1_.pdf

    Legislation will be introduced in Finance Bill 2014 to provide that from the 2015-16 tax year, a spouse or civil partner who is not liable to income tax because their income is below their personal allowance or who is liable to income tax at the basic rate, dividend ordinary rate or the starting rate for savings will be able to elect to transfer £1,050 of their personal allowance to their spouse or civil partner. There will be a corresponding reduction to the transferring spouse's personal allowance.
    A spouse or civil partner who is liable to income tax at the basic rate, dividend ordinary rate or the starting rate for savings will receive the transferred personal allowance. The transferred allowance will be given effect as a reduction to the recipient's income tax liability at the basic rate of tax.
    And the legislation itself:

    http://www.legislation.gov.uk/ukpga/2014/26/section/11/enacted

    The transferring person can be a basic rate taxpayer.

    ETA: though having read the legislation, it might not work in the scenario I described to get tax free interest, because it looks like the legislation is written to provide a reduction in tax of transferred allowance x basic rate, rather than extra allowance.

    So might be possible if both pay basic rate tax but not actually use in any situation!
    Last edited by zagfles; 06-04-2015 at 3:55 PM.
    • AlwaysLearnin
    • By AlwaysLearnin 6th Apr 15, 7:34 PM
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    AlwaysLearnin
    I stand corrected. Thanks for that.

    Got me thinking now; just wondering if I can make this work for our situation - I'm currently making pension contributions to stay under the higher rate tax, and OH has a part time job not much above the PA amount, so I wonder if I could transfer part of my PA, up my pension contributions to stay in BR tax (effectively therefore getting 40% relief on the extra?), and in turn take OH out of BR? Bit of reading to do...!
    • enthusiasticsaver
    • By enthusiasticsaver 6th Apr 15, 8:51 PM
    • 9,742 Posts
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    enthusiasticsaver
    Something I never realised until today is that if you are a low earner (less than £15600 per annum) you can get your interest on savings gross of tax from today. I only work part time, earning just over £12200 per annum and have just registered for gross interest on my Santander 123 current accounts saving me £180 per year in tax.
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • AlwaysLearnin
    • By AlwaysLearnin 6th Apr 15, 9:55 PM
    • 613 Posts
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    AlwaysLearnin
    [snip]
    And the legislation itself:

    http://www.legislation.gov.uk/ukpga/2014/26/section/11/enacted

    The transferring person can be a basic rate taxpayer.

    ETA: though having read the legislation, it might not work in the scenario I described to get tax free interest, because it looks like the legislation is written to provide a reduction in tax of transferred allowance x basic rate, rather than extra allowance.

    So might be possible if both pay basic rate tax but not actually use in any situation!
    Originally posted by zagfles
    Having read it, doesn't 55C cover the need for the person transfering their allowance needing to be under PA?

    (2)The condition is that the individualís hypothetical net income for the tax year concerned is less than the amount of the personal allowance to which the individual is entitled for that tax year under section 35 or 37.
    • zygurat789
    • By zygurat789 7th Apr 15, 8:28 AM
    • 4,229 Posts
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    zygurat789
    Having read it, doesn't 55C cover the need for the person transfering their allowance needing to be under PA?
    Originally posted by AlwaysLearnin
    Sec 55C (1)(c) seems to say that you can pay basic rate tax after the transfer but the condition at 55C (2) seems to contradict this.

    There is a great deal of confusion here which has been caused solely by the gov.uk site who are much worse than HMRC used to be. They do not seem to understand that you can earn more than £42,285 and still pay the basic rate of tax.
    The only thing that is constant is change.
    • zagfles
    • By zagfles 7th Apr 15, 10:28 AM
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    zagfles
    Sec 55C (1)(c) seems to say that you can pay basic rate tax after the transfer but the condition at 55C (2) seems to contradict this.

    There is a great deal of confusion here which has been caused solely by the gov.uk site who are much worse than HMRC used to be. They do not seem to understand that you can earn more than £42,285 and still pay the basic rate of tax.
    Originally posted by zygurat789
    Yes and the budget note doesn't seem to match with what the legislation says.

    What the legislation seems to be saying is that before the transfer the income must be below the personal allowance and after the transfer the income must not be liable to more than basic rate tax (but how could it ever be???)

    So someone who earns say £10k would be below the personal allowance before the transfer, and so OK under 55C(2), but would end up paying a bit of tax as a result of the transfer reducing their allowance, obviously basic rate so OK under 55C(1)(c) !!

    Maybe the gov.uk noddy guide was right after all But the budget documents were wrong!
    Last edited by zagfles; 07-04-2015 at 10:32 AM.
    • AlwaysLearnin
    • By AlwaysLearnin 7th Apr 15, 1:31 PM
    • 613 Posts
    • 534 Thanks
    AlwaysLearnin
    Back to the drawing board on the loophole search then....
    • quietriot
    • By quietriot 7th Apr 15, 4:05 PM
    • 162 Posts
    • 197 Thanks
    quietriot
    Sec 55C (1)(c) seems to say that you can pay basic rate tax after the transfer but the condition at 55C (2) seems to contradict this.
    Originally posted by zygurat789
    The condition in s55C(2) only applies if s56(3) ITA07 applies. (see s55C (1)(d))
    For clarity, s56(3) ITA07 says:
    An individual meets the condition in this subsection if, at any time in the tax year, the individual—
    (a)is resident in the Isle of Man or the Channel Islands,
    (b)has previously resided in the United Kingdom and is resident abroad for the sake of the health of—
    (i)the individual, or
    (ii)a member of the individual's family who is resident with the individual,
    (c)is a person who is or has been employed in the service of the Crown,
    (d)is employed in the service of any territory under Her Majesty's protection,
    (e)is employed in the service of a missionary society, or
    (f)is a person whose late spouse or late civil partner was employed in the service of the Crown.
    So if you're UK resident for reasons other than the ones above, disregard s55C (2)
    • zagfles
    • By zagfles 8th Apr 15, 8:07 AM
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    zagfles
    The condition in s55C(2) only applies if s56(3) ITA07 applies. (see s55C (1)(d))
    For clarity, s56(3) ITA07 says:


    So if you're UK resident for reasons other than the ones above, disregard s55C (2)
    Originally posted by quietriot
    Thanks, that makes more sense, so basic rate taxpayers (who are "normal" UK residents) can transfer their allowance.

    Though it seems the recipient of the transfer gets a reduction of tax rather than an increased allowance so it won't help in the scenario where someone is earning around £16k to get their interest tax free.
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