Autumn Statement - Our Summary of the impact on Personal Finance

Personal Tax

Income tax personal allowance was increased to £10,600 for 2015/15. This accelerates the effective phasing out of the age allowance.  THe increase in personal allowance will be passed on in full to higher rate tax payers.

ISAs – improved tax efficiency

Partners can now effectively inherit a deceased spouse's ISA wrapper.

Going forwards, surviving spouses will have an additional ISA allowance, equal to the amount the deceased spouse had in their ISA, which can be used from 6 April 2015. This could help the surviving partner to preserve a tax-efficient ISA wrappers and is a welcome change.

The mechanics of this are a little involved  - the ISA wrapper and tax-efficient status are still lost as at present when someone dies. The way the ISA status is being retained is by providing an additional one-off allowance to the surviving spouse or civil partner to be used on or after 6 April 2015.

ISA limit will also increase with inflation to £15,240 from 6 April 2015.

In our experience couples invariably manage their money jointly using individual tax wrappers such as ISAs to shelter savings and investments from tax. This change has removed a quirk of the tax system which was a source of frustration and additional tax cost for surviving spouses.

Pensions and annuities tax-free on death before age 75

As expected, previously announced, and some new very welcome changes were confirmed, which apply on death.

Death benefits paid from pension annuities will now enjoy the same tax-free treatment as income drawdown. This is a welcome equalisation of the new rules.

However this change will only apply where annuity payments are made to beneficiaries for the first time after April 2015. Existing annuities will not benefit from the new tax exemption. It will also now be possible for a joint life or guaranteed term annuity to be paid tax free to any beneficiary.

Pension tax relief - no change

There was a welcome decision not to meddle any further with pension contribution tax reliefs or allowances

Long-awaited stamp duty reform

The structure of stamp duty land tax has been creating distortions in the housing market for years.

Up until now a property costing £499,000 would be subject to 3% stamp duty charge (£14,970), whereas a £500,000 house would be subject to 4% on the whole amount (£20,000). 

The new tiered system applies with immediate effect, and removes these distortions

Property value

Properties to the value of

Stamp duty

Up to £125,000

£125,000

0%

On the next £125,000

£250,000

2%

On the next £675,000

£925,000

5%

On the next £575,000

£1.5m

10%

Excess

£1.5m+

12%

The general result is that properties valued at less than £935,000 will tend to pay less stamp duty and those above will pay increasingly more.