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Simplified tax on trusts, increased ISAs and partner-friendly pensions

Autumn Statement

3 December 2014

Patricia Mock, a tax director in the private client services practice at Deloitte comments:

Inheritance tax
“The planned changes for calculating inheritance tax on trusts will not be introduced as presently proposed. They will be replaced by a more targeted change to prevent avoidance through the use of multiple trusts. This is a welcome turnaround following comment that the proposed changes were overly complicated and would increase charges on most trusts.”

ISAs
“The ISA subscription limit for 2015/16 will be increased to £15,240, and the Junior ISA and Child Trust Fund limits will rise to £4,080. There are also proposals to allow ISAs built up on death to be transferred to a spouse or civil partner who will be able to continue to benefit from the tax free status. At present ISAs lose their tax free status on death. Such transfers will of course also be exempt from inheritance tax as they are to a spouse or civil partner.”

Pensions
“Whilst many changes towards pensions flexibility are already included in the Taxation of Pensions Bill, one further change has been announced today which allows those who have already taken annuities to benefit.

“The Chancellor has announced that, as well as drawdown pensions paid to spouses, or other dependants or nominees (tax-free where the member died before reaching the age of 75), income tax on inherited joint-life or guaranteed term annuity payments after the death of the original scheme member, will no longer be taxable if death is before the age of 75. This will apply from April 2015 provided no payments have been made to the beneficiary before 6 April 2015. As the changes announced in September only affected drawdown pensions, this would have created significant disparity in the income tax treatment of dependants’ pensions, as dependants’ annuities and scheme pensions would have remained fully taxable irrespective of the member’s age on death.

“This announcement puts the income tax treatment of drawdown pensions and annuities back on a level playing field and is good news for prospective recipients of future dependants’ annuities. Whilst typically joint-life annuities would be taken out with a spouse, there will be rules allowing such annuities to be re-directed (again tax free) to any beneficiary. This too is consistent with the rules for new pensions.”

Visit our dedicated Autumn Statement website

-Ends-

Notes to editors

About Deloitte

In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.
 

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