The main forecasts and measures announced by Chancellor George Osborne in the 2014 Autumn Statement included simplification of the taxation of employee benefits and expenses, investment in mental health, the abolition of the death tax and annuity changes, a fuel duty update, partners inheriting the tax benefits of individual savings accounts (Isas) and changes to the higher-rate tax threshold.
The Chancellor said the government had accepted 51 of 58 recommendations made by the Office of Tax Simplification (OTS) that were aimed at making the taxation of employee benefits and expenses more straightforward. This will help to reduce the administrative burden on employers, saving an estimated £20 million a year nationally.
Proposals included the creation of an employee shareholding vehicle to encourage wider share ownership by staff.
Alastair Kendrick, tax director at MHA MacIntyre Hudson, said: “We welcome the government’s commitment to implement many of the OTS recommendations, but surely we want to know when these changes will take place.”
The Chancellor also announced that fuel duty will be frozen and that the government will invest £3 million to expand existing psychological work and wellbeing pilot schemes.
He also abolished the 55% tax charge levied on beneficiaries of individuals who die under the age of 75 with a joint life or guaranteed term annuity. Beneficiaries will be able to receive any future payments from such policies tax-free if no payments have been made to the beneficiary before 6 April 2015.
This equalisation of ‘death taxes’ for annuities and income drawdown means more people can take advantage of annuity risk sharing.
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “Confirmation that death benefits paid from annuities will enjoy the same tax treatment as income drawdown is a welcome equalisation of the new rules. It means investors will not be penalised for selecting the security and efficiency that an annuity offers.”
The Chancellor also announced that the income tax personal allowance will increase to £10,600 from April 2015, which is slightly more than the increase of £10,500 announced in the Queen’s Speech in June.
Also from April 2015, if an Isa holder in a marriage or civil partnership dies, their spouse or civil partner will inherit the Isa tax benefits.