George Osborne announces radical reforms on pensions and savings and increased support for exporters and manufacturers in his fifth budget.
As well as confirming an increase in the UK growth forecast for 2014 at 2.7% (up from 0.6% in 2013), the chancellor announced extended investment allowances for businesses.
The key issues affecting dentists are likely to involve those who will benefit from the increased higher tax rate threshold and increased tax-free personal allowance.
Anyone earning up to £100,000 will pay less tax.
New pension legislation will be put in place to offer far greater flexibility for those who wish to draw income from their pension without taking an annuity.
A summary of some of the key points affecting dentists are:
- Tax-free personal allowance increases to £10,500 taking three million out of income tax
- Higher rate tax threshold will be raised to £42,285 and higher-rate taxpayers will also benefit fully from the increased tax-free personal allowance. Those earning up to £100,000 will pay less income tax as a result
- Savers rewarded with a new ISA allowance to promote simplicity and flexibility. The merger of stocks and shares and cash ISA allowances offers a new annual ISA limit of £15,000 from 1 July 2014. The junior ISA allowance increases to £4,000
- A ‘pensioner bond’ for over 65s from January 2015. To be available through NS&I (National Savings & Investments) offering a (likely) interest rate of 2.8%. A maximum bond of £10,000 per individual
- The cap on premium bonds will increase from £30,000 to £50,000 next year
- Tax treatment of pensions (not defined benefit or final salary schemes) radically changed involving a separate act of parliament next year
- Minimum (existing) income requirement for ‘flexible drawdown’ reduced from £20,000pa to £12,000pa
- All remaining tax restrictions on taking pensions will be lifted – no caps, no limits, so no requirement for annuities
- No 55% tax charge on drawing out money from your pension above the current limits – marginal tax rates on drawdown will apply, allowing individuals to take income from pensions in a more flexible manner
- 10p tax rates for savings income abolished to ‘0p’.
The new flexibilities on pensions and increased ISA allowances are likely to be of most use to dentists.
A detailed budget summary will be available at www.pfmdental.co.uk from later today.