Savings - Income Tax - Life Insurance
Individual Savings Accounts (ISAs)
From 6 April 2010 the ISA limit will be raised to £10,200, up to £5,100 of which can be saved in cash. The higher limit was available to investors aged 50 and over from 6 October 2009.
From 6 April 2011 and over the course of the next Parliament, the annual ISA limits will increase each year in line with the RPI. The new annual limits will be rounded to the nearest multiple of 120 so that individuals who save monthly will be able to calculate their monthly savings more easily.
The new limits will be calculated by reference to the RPI for the September before the start of the tax year, and HMRC will announce the new limits as soon as possible after the RPI figure is published, and at least four months in advance of the start of the new tax year in which they will apply.
In the event that the RPI is negative, the ISA limits would be unchanged.
As is the case now, following indexation, the cash ISA limit will be half the value of the stocks and shares ISA limit.
Income tax adjustments between settlers and trustees
Settlers (people who set up a trust) may receive repayments of tax on trust income if they are liable to income tax at a lower rate than the trustees. A proposed new measure, to be effective from 6 April 2010, will require settlers to pay any such repayments of tax they receive to the trustees. It is understood that these payments to trustees will be disregarded for inheritance tax purposes.
Life insurance deficiency relief
Individuals may be entitled to the relief if their tax calculation needed when a policy or contract comes to an end gives a negative result rather than a gain, but taxable gains have arisen earlier in the life of the same policy or contract.
At present, a tax reduction may be due for the year in which the policy comes to an end if the individual has income subject to the higher rate and dividend upper rate of tax. New legislation, applying to surrenders on or after 6 April 2010, will extend the relief so that a tax reduction may also be due if the individual has income subject to the additional and dividend additional rates of tax.
This measure also provides that deficiency relief triggered by the surrender of a policy on or after 6 April 2010 may be restricted. The restriction will apply if the main purpose of an individual being a party to arrangements is to secure a tax reduction greater than the income tax due on earlier chargeable events that led to the relief. This provision applies to arrangements made on or after 22 April 2009 that culminate in the surrender of the policy on or after 6 April 2010.
Based on a report by Nicholsons Chartered Accountants on 26/03/2010
