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March 20, 2013 2:52 pm
For individuals, the big changes in the Budget included increases personal allowances, extra support for homebuyers, better compensation for victims of the Equitable Life collapse and changes to rules on Aim shares and child trust funds.
George Osborne, the chancellor, said the personal allowance would rise to £10,000 with effect from April 2014, fulfilling a coalition agreement pledge. This will benefit those on lower incomes, but for those on medium earnings, the effect will be blunted by reductions in the basic-rate limit (the amount beyond which tax is paid at the 40 per cent rate), which has fallen for the past three years.
Those earning more than £150,000 a year will benefit from the reduction in the top rate of tax that starts next month.
The chancellor pledged more measures to clamp down on aggressive tax avoidance. In addition to agreements already concluded with Liechtenstein, Switzerland and the Isle of Man, he said deals with Jersey, Guernsey and other offshore centres would follow.
So far, there have been over 50,000 disclosures of offshore accounts to the UK tax authorities. According to the Treasury, over £3bn of tax has been recouped from Liechtenstein while over £5bn is expected from Switzerland and £1bn each from the Isle of Man and Guernsey.
Two measures were introduced to improve mortgage availability. The Help to Buy equity loan is extended to all home buyers purchasing newbuild homes up to a value of £600,000. The buyer must find a 5 per cent deposit, the government will put up 20 per cent and a commercial lender will provide the rest. Osborne said the scheme, which will run for three years from April 2013, should unlock another £3.5bn.
The mortgage guarantee applies to all property purchases, not just newbuilds, and is aimed at those with sufficient income to fund mortgage repayments but insufficient deposits to access them. The buyer supplies a 5 per cent deposit and arranges a mortgage, with 20 per cent of the loan guaranteed by the government. The scheme will start in January 2014.
Experts believe that a scheme trailed last year, where parents could dip into their pensions to finance deposits for their children’s homes, has now been abandoned.
Shares traded on the alternative investment market are already exempt from inheritance tax if held for more than two years, and should shortly be exempt from capital gains tax if held within an individual savings account (Isa). Osborne said that from April 2014, Aim shares (and those on other growth markets, such as ICAP-controlled ISDX), will also be exempt from 0.5 per cent stamp duty reserve tax.
Those who bought Equitable Life annuities before 1992, who had been excluded from previous compensation arrangements, will now be entitled to up to £5,000 in compensation. However, many of those affected have since died.
Child trust funds
Holders of child trust funds should in future be able to merge them with Junior Isas, a move that will be revenue neutral, but will lower investment costs and improve choice for parents and grandparents.
Tom Stevenson, investment director at Fidelity, said the move was welcome. “Children with CTFs should have the same investment opportunities as those children who already hold a Junior Isa,” he added.
As had been widely trailed, rises in fuel duty and beer tax were scrapped, with beer duty reduced by 1p a pint.
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