This week we are taking a look at the key pledges made by the Conservative party and what we can expect from them in the next five years, a lot of which was included in the recent Queen’s speech (May 2015).
They have promised to:
- Increase the Inheritance Tax threshold on family homes to £1 million by 2017. There are promises of a new transferable allowance of £175,000 per person for married couples and civil partners when their main residence is passed down to children on death – this will come on top of the existing £325,000 tax free allowance and will mean that individuals who die and pass on assets worth up to £500,000 will be charged no inheritance tax at all. This aims to help ensure that the home that you have worked and saved for belongs to you and your family. The party have proposed that this will be paid for by reducing tax relief on pension contributions for people earning more than £150,000.
- Introduce a law which aims to guarantee no rise in income tax rates, VAT or National Insurance before 2020.
- Hold a referendum on membership of the EU by 2017.
- Crack down on tax evasion and the avoidance of tax.
- Ensure that anyone who earns less than £12,500 will not pay income tax.
- Raise the threshold for the 40p rate of tax so that nobody earning under £50,000 pays this higher rate.
- Seek reform of the EU and to reclaim powers from Brussels (Talks for this have already begun).
- Get rid of the Human Rights Act and instead introduce a British Bill of Rights. The European Court of Human Rights will also have its role reduced (This seems to be put on hold for now).
- Continue to increase the state pension through the triple lock system (this was introduced by the coalition government in 2010 and is a guarantee to increase the state pension every year by the highest of the following three: inflation, average earnings or a minimum of 2.5%).
- Cap charges on residential care (this will be implemented as part of the changes under the second part of the Care Act which will be introduced in April 2016).
- Introduce a single tier pension system. Under the Pensions Act 2014 the new state pension system for future pensioners will be introduced from 6 April 2016. This will replace the current complicated pension system and everyone with 35 years of National Insurance contributions will receive a single amount. If people have fewer than 35 years of pension contribution when they reach State pension age then they will get a pro-rata amount. You will need a minimum number of qualifying years to receive a single-tier pension at all.
- Restrict tax relief on pension contributions for those earning more than £150,000 by cutting the annual pension contribution allowance.
- The Lifetime Allowance is cut to £1million, which means that there are penalties for paying more into a pension once it reaches that size.
- Pension freedom rules were changed and came into force on 6 April to give people much more flexible access to their retirement pots. Under the changes, people can now invest or spend it as they wish after they reach the age of 55.
- More government waste will be cut and more services will be put online.
- With these changes in mind, the Chancellor of the Exchequer, George Osborne, has announced that there will be a Summer Budget on 8 July 2015. We may therefore start seeing some of these commitments delivered to us sooner than we thought. Of some of the changes promised in July, George Osborne has stated that there will be a fresh crackdown on tax avoidance which is designed to raise around £3 billion.
Whilst these changes haven’t come into force yet we expect to see some implemented after the budget in July. We will continue to look out for any changes that may have an effect on your estate planning.