What does the chancellor’s Budget mean for you?

Catherine Gannon, 51
Managing director of law firm Gannon

The business continues to perform extremely well, but new legislation for LLPs means that it is being restructured. Profits and earnings are up on last year but the cost of living has increased rapidly. She doesn’t have much by way of a traditional pension plan but hopes her business will be sold to provide a pension eventually. Catherine lives with two children, aged 11 and 13, in a home with a mortgage and holds several investment properties. She uses the tube to travel to meet clients.

Catherine has a number of issues to consider in view of the changes taking effect from 6 April 2014 in relation to partnerships. Catherine will need to consider her role in the partnership to establish if she is, and the other partners within the firm are, in fact self-employed or employed. As Catherine does not currently have large pension provisions it is unlikely she will be affected by the reduction of the life time limit from £1.5m to £1.25m but she may wish to make annual contributions.

Martin Winter, 59
Partner, Taylor Wessing

Martin lives in Wandsworth with his wife in a home they own outright, without a mortgage. They have a son of 24 doing an MBA at a US university on a waterskiing scholarship and a daughter of 22 at London University. Martin runs to work every day and rarely uses public transport to get around. He uses his car mainly at weekends, and flies on business trips. Taylor Wessing recorded average earnings per partner of £544,000 last year. He saves through Isas.

Assuming Martin has a pension fund, as he is approaching retirement age and is earning a significant profit share he may be affected by reduction of the lifetime pension limit from £1.5m to £1.25m. It is possible for Martin to take out lifetime protection which will safeguard his current pension fund on the condition that no further contributions are made. In addition, there will be much more flexibility on what Martin can do with his pension fund as he will no longer be required to purchase an annuity. The announcement that Isas will have an increased contribution limit of £15,000 per year from 1 July 2014 will mean that Martin and his wife can save up to £30,000 in a tax free environment saving up to 45 per cent income tax on interest.

Kristo Kaarmann, 33
Co-founder of TransferWise, a peer-to-peer international money transfer business, based in Shoreditch

Kristo’s business is three years old. It has attracted $7.35m worth of investment from venture capital and private investors. The business is growing at over 20 per cent a month. He employs 15 people in the UK and a further 60 around the world, but he’s looking to grow these teams this year. He travels overseas twice a month to visit international offices and the firm’s US investors. Kristo owns property in Tallinn, but rents in London. He cycles to work, takes a salary of £35,000 and doesn’t have a pension.

Following the announced changes to the tax bands and rates, if Kristo’s salary remains at £35,000 per year, he will receive additional income of £11 per month in 2014-15 when compared to 2013-14. As a rapidly growing business TransferWise may benefit from the 100 per cent increase in the Annual Investment Allowance (AIA) from £250,000 to £500,000 from 1 April 2014. This could help fuel expansion of the business and enable the company to accelerate the tax relief on capital expenditure. Finally, as Kristo is currently renting in London he may benefit from the extension of the ‘Help to Buy’ equity loan scheme to 2020.

Lucy Bishop, 26
Public relations executive, PwC

Lucy is living with her parents and saving with her partner for a deposit on a flat. She is saving via an Isa and a high interest savings account. She earns a salary of £28,000. Lucy travels to work on the train and drives at weekends. She is a moderate drinker of wine.

Due to the changes in tax rates and bands Lucy will receive additional salary of £11 per month in 2014/15 compared to 2013/14. With the increased contribution limit for Isas, Lucy will be able to save up to £15,000 (in cash or shares) from 1 July 2014 and pay no tax on income or capital gains. This will help towards saving for her deposit. In addition she may benefit from the extension of the Help to Buy equity loan scheme to 2020. Lucy and her partner will only need a five per cent deposit to be provided with a 20 per cent loan government loan and a 75 per cent mortgage to fund the purchase of a new-build property priced up to £600,000. As an employee, Lucy may also benefit from an interest-free loan from her employer to cover her train season ticket and not suffer any tax (up to £10,000). Away from work, Lucy should not suffer increased fuel costs as the tax has been frozen, however, tax on wine is set to be increase by inflation which is currently at 2.8 per cent.

Iona Wright, 26
Associate at Norton Rose Fulbright

Iona is in an earning band that starts at £63,000. She rents her accommodation in Angel. She commutes to work via tube, and doesn’t own a car. She’s saving for her pension in the company scheme. She’s a non-smoker but she drinks in moderation.

From 6 April 2014 Iona will be £15 better off each month due to the changes in personal allowance and income tax bands. The contributions she makes into her pension will continue to receive higher rate tax relief and whilst the annual contribution limit has fallen from £50,000 to £40,000 (gross) this is unlikely to affect her based on her level of income. If offered by her employer, Iona is able to borrow a maximum of £10,000 interest free to cover the cost of her season ticket and not suffer tax.

As a renter, Iona may be tempted to buy her own home through the ‘Help to Buy’ equity loan scheme which has been extended until 2020 to purchase a new build property.

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