22nd March 2013

Scottish Widows: March 2013 Budget update

The Chancellor presented his 2013 Budget. Our Financial Planning team has prepared detailed analysis of the announcement which highlights the key impacts for you and your clients.

View our dedicated Budget pages

The key impact areas are shown below.

  • Rise in the capped drawdown limit, from 100% to 120% of the value of an equivalent annuity, will apply from 26th March 2013.
  • The single-tier State Pension will be introduced in April 2016. At this time the State Second Pension will close and contracting-out of National Insurance will be abolished.
  • The annual ISA subscription limit increases to £11,520 (£5,760 for cash ISAs) for 2013/2014. The Junior ISA subscription limit increases to £3,720 for 2013/2014.
  • The personal allowance will rise to £10,000 from April 2014. This allowance is already set to increase by £1,335 to £9,440 in April 2013. The timing of the rise in the personal allowance to £10,000 in April 2014 will coincide with the well publicised spike in the number of employers reaching their staging date, lifting some of the burden of automatic enrolment from SME employers.
  • The additional rate of income tax will reduce to 45% (37.5% for dividend income) with effect from 6th April 2013.
  • The capital gains tax exemption will increase to £10,900 for 2013/2014. Increases to £11,000 from April 2014 and to £11,100 from April 2015 had already been announced.
  • The main rate of corporation tax will be cut to 20% from April 2015. It's already being cut from 24% to 23% on 1st April 2013 and to 21% on 1st April 2014.
  • The Government intends to launch Universal Credit nationally in October 2013 following a pilot launch in April 2013. It’s intended that all new claims will be for Universal Credit from April 2014.
  • A few points of interest related to the previously announced reductions in the pension lifetime allowance from £1.5m to £1.25m and the annual allowance from £50,000 to £40,000 in April 2014.

If you have any questions on the Budget update please contact your account manager.

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