last year. These allow individuals to pass
ISA holdings onto a spouse or civil partner,
thereby preserving the tax relief.The ISA tax
wrapper protects the value, and any future
growth from them, for the remainder of the
life of the inheriting spouse or civil partner
– one more reason to ensure that you make
the most of the annual ISA allowance – of
£15,240 per person – this tax year.
Getting on top of all these changes now
is a good move because there is another
major change coming down the line that will
also require some planning by homeowners.
The new residential nil-rate band (RNRB)
starts inApril 2017 at a level of £100,000
and will increase by £25,000 a year, finally
reaching £175,000 inApril 2020.
‘This will take a lot of people out of
the IHT net,’ saysTony Müdd.The RNRB
protects the home from IHT in cases
where that property is passed on to a direct
descendant. Unused RNRB can be passed
on to a surviving spouse or civil partner.
RNRB is of most use to people with homes
worth up to £2million. For homes with higher
valuations, the RNRB is tapered away.
It is particularly important for people
withWills to review these changes in order
to adapt them to the new fiscal environment.
For more details of these changes, please contact your
St. James’s Place Partner.
Balance sheet
Advice is important to ensure you reap
the benefits from the new allowances coming in from
6 April and ensure your Will is amended accordingly.
IN YOUR INTEREST
TAX PLANNING
decision for each individual,’ says Müdd.
Another new tax incentive is the Personal
SavingsAllowance – again, starting on 6April
– which offers a tax break on up to £1,000
of bank and building society interest for basic
rate taxpayers (or up to £500 for higher rate
taxpayers).Tax will no longer be deducted at
source from these accounts.
‘The introduction of these new measures
will encourage many couples to redistribute
assets between them to ensure that their joint
arrangements are as effective as possible,’
says Müdd. So a husband who has £10,000
of dividend income might give half of the
underlying shareholding to his wife so
that both spouses fall within the Dividend
Allowance. Similar steps can be taken with
the Personal SavingsAllowance and couples
could also help each other to use up their
pension contribution allowances.
The usual year-end checks are also still
important.These include using the annual
£3,000 gift allowance and £250 small gifts
exemption in IHT planning. ISAs can also now
be a useful tool in IHT planning, following
changes that came into effect inApril
People who reach State Pension age before
6 April 2016 are being offered the chance
to take part in a ‘ground-breaking scheme’ to
increase their State Pension, to quote the words
of Pensions Minister Baroness Altmann. This is
a valuable benefit because the State Pension
is index-linked. The government estimates that
some 250,000 people will take up the offer,
which allows them to buy between £1 and
£25 a week of extra pension for a lump sum
payment of up to £23,900, depending on
a person’s age and the amounts involved.
But this age group is also offered attractive
terms to encourage them to defer taking
the State Pension. If you defer it for a year,
the amount you get increases by 10.4%.
This may be a better alternative for many
people, according to actuaries Mercer. It is
important to take advice on the two options
before reaching a decision.
DEFER TODAY,
GAIN TOMORROW
RNRBwill be of most
use to peoplewith
homesworth up to
£2million
Dividend taxation is being changed with
the introduction on 6April of a nil rate on the
first £5,000 a year from IncomeTax. Receipts
above that level will be subject to 7.5%,
32.5% or 38.1% tax, depending
on whether your income is subject to the
basic, higher or additional rate.Those
with dividend earnings above the threshold
should, therefore, consider changing the
balance of dividend income.This could be
done, for example, by switching investments
between spouses or, for business owners,
adjusting the balance between salary and
dividend income.‘It’s very much a bespoke
