The recent budget brought in a number of changes to ISAs, Child Trust Funds, tax and pensions that will affect families. In her latest guest post for Dadbloguk, Standard Life family finance expert Julie Hutchison outlines what these changes are and how they may affect your family.
What was in Budget 2015 for parents and children? And if you’re saving for the future, what’s changing on 6th April 2015? Here’s a summary of what’s happening.
Tax-free childcare for parents of disabled children
Parents of disabled children are to get more financial help, from autumn 2015. The maximum Government top-up to childcare scheme accounts for disabled children is being doubled. A parent will be able to pay a maximum of £16,000 to the scheme and will get up to £4,000 in Government top-ups. In other words, this tax relief works by giving you £200 for every £800 you pay in, up to the maximum.
ISAs and Junior ISAs get a boost
ISAs change in two ways from 6 April. The savings limit goes up to £15,240 from £15,000. And with the changes made in 2014, you’ll now have more flexibility over your ISA savings since you can transfer old Cash ISAs to Stocks and Shares ISAs, and vice versa.
The second change will benefit you if you’re married or in a civil partnership. When someone dies (on or after 3 December 2014), the value of their ISAs when they die becomes an inheritable ISA allowance for their surviving spouse or civil partner – this can be claimed from 6 April 2015.
The savings limit for a Junior ISA or Child Trust Fund goes up to £4,080 from 6 April. And Junior ISAs are also due to accept transfers from Child Trust Funds from 6 April. This opens up more options if you’re one of the parents of the 6 million children who have these older savings accounts.
Proposed Cash ISA changes
A Help to Buy Cash ISA is due to be created in the autumn, to support you if you’re building-up cash for a house deposit. You only receive the government’s proposed 25% top-up of up to £3,000 per person when you buy your first home. If you save up to £12,000 in this new Help to Buy ISA, the government has proposed it will give you £3,000. Details should be clearer towards the autumn.
There’s also a proposal for Cash ISAs to be made more flexible from this autumn, to allow top-ups to replace withdrawals within the same tax year- details awaited.
Income tax cuts
Several changes take effect from 6 April which may put more cash in your pocket, in particular if you have a low income. First off, as I wrote about in a previous Dadbloguk posting, there’s a new transferable income tax allowance for married couples and civil partners, which could benefit over 4 million couples. You can claim this allowance online, and you’ll be up to £212 better off overall. Check out the case study and criteria in my previous dadblogUK posting. This is particularly relevant for stay-at-home parents who doesn’t have a salary.
A second change will help you if your total income is under £15,600. From 6 April no tax will be due on your savings income, which means you can ask your bank or building society to register you for tax-free interest, using form R85.
There was also good news for everyone earning under £100,000. From 6 April, 20% tax payers will pay £120 less tax because the new £10,600 tax-free personal allowance comes in. The tax cut for higher rate tax payers will be £104. That’s because of the combined effect of the new personal allowance and threshold for 40% tax of £42,385.
The pension pot you might inherit
The death tax charge of 55% is scrapped from 6 April. This means if you’re in the position of inheriting a pension pot from one of your parents, for example, there could be less or no tax to pay, depending on the type of pension they have.
If your loved one dies before age 75, their pension is passed on free of tax. And if they die after the age of 75, the income tax rate of the beneficiary applies to whatever money they decide to take out from the pension pot they’ve inherited, which could be 0%, 20%, 40% or 45%. Pensions can be passed on again and again, with the income tax rate reset by the age of each pension beneficiary.
That’s it for my Budget 2015 blog. If you have any questions about how these changes affect you, please post below.
Julie is a regular blogger at moneyplusblog.
The information in this blog or any response to comments should not be regarded as financial advice. A Stocks and Shares ISA and a personal pension are investments. Their value can go up or down and may be worth less than you paid in. Laws and tax rules may change in the future. The information here is based on our understanding in March 2015. Your personal circumstances also have an impact on tax treatment.
Disclosure; I was compensated for adminstering this blog post.