Money Matters

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Scott Woods’ weekly financial column

Drawdown – maximum GAD increasing to 120% (from 100%): There has been much comment about the widening gap between annuity and drawdown incomes. The Government has responded by announcing they will raise the capped drawdown limit to 120. Although they are keen that this happens quickly, revised legislation is needed as well as an indication from the industry as to how quickly this could happen.

Pension Annual Allowance – reducing from £50,000 to £40,000 from 2014/15: The cap is reducing but the rules will work as they do now and relief will still be available at an individual’s highest rate. Carry forward will continue to be available.

Lifetime Allowance – reducing from £1.5 million to £1.25 million from 2014/15: Individuals will be able to apply for ‘Fixed Protection 2014’ to retain the right to use £1.5million. However, they cannot make any further pension contributions. HMRC will also be considering offering a ‘personalised protection’ option which would enable individuals to continue to save in pensions, though their pension rights could not exceed the value as at April 5, 2014.

Inheritance Tax (IHT): The IHT nil-rate band is frozen at £325,000 until April 2015. However, for the 2015/16 tax year the band will be increased to £329,000.

Capital Gains Tax (CGT): The Capital Gains Tax annual exempt amount will increase to £11,000 in 2014/15 and £11,100 in 2015/16.

Income Tax: For those born after April 6, 1948 the income tax Personal Allowance for 2013/14 will be £9,440. For 2013/14, higher rate tax will apply for taxable income between £32,011 and £150,000. The additional rate of income tax will apply where taxable income exceeds £150,000.

Individual Savings Accounts (ISAs): The ISA subscription limit, currently £11,280, of which £5,640 may be invested in cash, will increase in 2013/14 to £11,520, of which up to £5,760 may be invested in cash.