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

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Former_MSE_Helen
Former_MSE_Helen Posts: 2,382 Forumite
in Cutting tax
From today a host of changes take force, including new pension freedoms, new ISA allowances and new tax rates...
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It's the start of the new financial year: Here's what's changing

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  • RobertinHerts
    RobertinHerts Posts: 209 Forumite
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    edited 6 April 2015 at 10:16AM
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    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
  • zagfles
    zagfles Posts: 20,323 Forumite
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    RobertinHerts wrote: »
    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?
    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
    RobertinHerts Posts: 209 Forumite
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    zagfles wrote: »
    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.
    Thanks zagfles.

    Is it handled by the executor? Or does the Pension company need to be notified in advance or Will revised?
  • Alter_ego
    Alter_ego Posts: 3,842 Forumite
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    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!
    I am not a cat (But my friend is)
  • zagfles
    zagfles Posts: 20,323 Forumite
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    RobertinHerts wrote: »
    Thanks zagfles.

    Is it handled by the executor? Or does the Pension company need to be notified in advance or Will revised?
    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
    zagfles Posts: 20,323 Forumite
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    Alter_ego wrote: »
    No mention of the ability to transfer £1060 personal tax allowance to a spouse - for non tax payers.
    This can be useful for taxpayers in some circumstances (eg to get tax free interest)
  • Alter_ego
    Alter_ego Posts: 3,842 Forumite
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    zagfles wrote: »
    This can be useful for taxpayers in some circumstances (eg to get tax free interest)

    Sorry I think we're at cross purposes. Only non tax payers can transfer to their tax paying spouse.
    I am not a cat (But my friend is)
  • zagfles
    zagfles Posts: 20,323 Forumite
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    Alter_ego wrote: »
    Sorry I think we're at cross purposes. Only non tax payers can transfer to their tax paying spouse.
    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
    Alter_ego Posts: 3,842 Forumite
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    zagfles wrote: »
    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.

    Thanks for the clarification, let's hope HMRC get on the case now.
    I am not a cat (But my friend is)
  • AlwaysLearnin
    AlwaysLearnin Posts: 874 Forumite
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    The person transfering part of their allowance must have income under the PA:

    https://www.gov.uk/marriage-allowance
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