Pensions tax relief

Reduction for those earning more than £150,000

Pension’s tax relief will be reduced for those earning more than £150,000, with some investors seeing the rebate on contributions capped at the basic rate of 20 per cent from 2011. Previously relief was available at the full 40 per cent rate on contributions made by higher-rate taxpayers. According to the government these changes will help create a “fair and modern” pension system.

Commencing from April 2010 the Chancellor announced the introduction of a new 50 per cent rate of tax for those with salaries over £150,000. This was originally set at 45 per cent and was due to be introduced in 2011. In addition from next year anyone earning over £100,000 will also lose their personal tax-free allowance completely.

Mr Darling said that the increase in the savings limit would be worth on average £4 a week to the older people helped by the change. Pensioners with savings of between £6,000 and £10,000 will be helped by an increase in the savings limit for pension credits.

The Chancellor reiterated that he would raise the state pension by 2.5 per cent next year, despite the spectre of deflation. "So if RPI inflation this September is below zero, as we expect, pensioners can be confident that their pensions will rise in real terms," he said.
A one-off increase in the Winter Fuel Allowance would be maintained for another year worth £250 for over 60s and £400 for over 80s.

The Chancellor also announced that he would raise the tax-free Individual Savings Account (ISA) limit. This will initially only apply to those over 50 years-old commencing from October this year. ISA providers are being given this period prior to October to adjust their systems. Individuals will be able to save £10,200 in their ISA, and up to £5,100 will be permitted to be saved in cash.

The government will extend the increases to the ISA limits to everyone from 6 April 2010. The annual ISA investment limit will increase for every adult to £10,200, and up to £5,100 can be saved in cash.

The government is extending its support for vulnerable home owners in financial difficulty through widening the eligibility criteria for the Mortgage Rescue Scheme so that households in negative equity are not excluded.

As part of this the government is announcing a £20 million fund to enable local authorities to extend small loans to families at risk of homelessness through repossession or eviction.

The stamp duty holiday has been extended until the end of this year, which follows the announcement last September by the Treasury that no Stamp Duty would be paid on properties purchased for less than £175,000 for 12 months. It is intended that once this comes to an end, the Stamp Duty threshold will revert back to £125,000.

For a temporary period, consumers will receive a discount of £2,000 on a new vehicle if they scrap a vehicle more than 10 years old that they have owned for more than 12 months.