A new Lifetime ISA will be available from April 2017 for adults under the age of 40. Individuals will be able to contribute up to £4,000 per year and receive a 25% bonus from the government. Funds, including the government bonus, can be used to buy a first home at any time from 12 months after opening the account, and can be withdrawn from age 60 completely tax-free.

Further details of the new account, which will be available from 2017, are as follows:

• Any savings an individual puts into the account before their 50th birthday will receive an added 25% bonus from the government.
• There is no maximum monthly contribution and up to £4,000 a year can be saved into a Lifetime ISA.
• The savings and bonus can be used towards a deposit on a first home worth up to £450,000 across the country.
• Accounts are limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together.
• Where an individual already has a Help to Buy ISA they will be able to transfer those savings into the Lifetime ISA in 2017, or continue saving into both. However only the bonus from one account can be used to buy a house.
• Where the funds are withdrawn at any time before the account holder is aged 60 they will lose the government bonus (and any interest or growth on this) and will also have to pay a 5% charge. After the account holder’s 60th birthday they will be able to take all the savings tax-free.

The Chancellor said in his speech:

‘My pension reforms have always been about giving people more freedom and more choice.

So faced with the truth that young people aren’t saving enough, I am today providing a different answer to the same problem.’

Internet link: GOV.UK lifetime-isa-explained

The current rates of capital gains tax (CGT) are 18% to the extent that total taxable income does not exceed the basic rate band and 28% thereafter.

The government is to reduce the higher rate of CGT from 28% to 20% and the basic rate from 18% to 10%. The trust CGT rate will also reduce from 28% to 20%.

The 28% and 18% rates will continue to apply for carried interest and for chargeable gains on residential property that do not qualify for private residence relief. In addition, the 28% rate still applies for ATED related chargeable gains accruing to any person (principally companies).

These changes will take effect for disposals made on or after 6 April 2016.

The rate for disposals qualifying for Entrepreneurs’ Relief (ER) remains at 10% with a lifetime limit of £10 million for each individual.

HMRC have introduced Advance Assurance for companies that claim Research and Development (R&D) tax relief.

If a company carries out R&D for itself or other companies, it could qualify for Advance Assurance. This means that for the first three accounting periods of claiming for R&D tax relief, HMRC will allow the claim without further enquiries.

Internet link: GOV.UK guidance

The government has announced the introduction of a new transferrable nil rate band for the family home. The additional band will apply where a residence is passed on death to direct descendants such as a child or a grandchild. This will initially be £100,000 in 2017/18, rising to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21. The additional band can only be used in respect of one residential property which has, at some point, been a residence of the deceased.

The allowance is in addition to the inheritance tax nil rate band which is currently set at £325,000. By 2020/21 the total individual nil rate band will therefore total £500,000.

Any unused nil rate band may be transferred to a surviving spouse or civil partner. It will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil rate band, are passed on death to direct descendants. This element will be the subject of a technical consultation and will be legislated for in Finance Bill 2016.

There will also be a tapered withdrawal of the additional nil rate band for estates with a net value (after deducting any liabilities but before reliefs and exemptions) of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

The IHT nil rate band is currently frozen at £325,000 until April 2018. This is to remain frozen until April 2021.

Internet link: TIIN IHT

The government has announced the introduction of a new National Living Wage (NLW) for working people aged 25 years and above. The NLW will introduce a premium on top of the national minimum wage (NMW). Initially the premium is set at 70p above the current NMW although this will fall to a premium of 50p when the NMW increase comes into effect in October 2015.  Further increases are to be recommended by the Low Pay Commission in order to achieve the government’s objective of reaching 60% of median earnings by 2020.

John Cridland, Director-General of the CBI, commented:

‘Small shops, hospitality firms and care providers are the businesses that will face real challenges in affording the National Living Wage.’

‘Delivering higher wages can only be done sustainably by boosting productivity. Bringing politics into the Low Pay Commission is a bad idea.’

Internet link: CBI press release