On 16 March, the Chancellor, George Osborne announced his Budget for 2016/17. We’ve picked out the measures, alongside the changes announced in the autumn, which are most likely to affect people over pension age now and in the near future.
State Pensions and benefits - new rates from April 2016
As previously announced, as of April 2016, there are 2 different systems for claiming State Pension.
If you reached State Pension age on or before 5 April 2016, you will claim under the pre-2016 State Pension system:
- This will apply to you if you’re a man born on or before 5 April 1951 or a woman born on or before 5 April 1953.
- The basic State Pension under the pre-2016 system will go up by £3.35 to £119.30 per week, although you may get more or less than this depending on your circumstances and your National Insurance record.
If you reach State Pension age on or after 6 April 2016, the new State Pension system will apply:
- This will affect you if you’re a man born on or after 6 April 1951 or a woman born on or after 6 April 1953.
- The full State Pension under the new State Pension will be £155.65 per week although you may get more or less than this depending on your circumstances and your National Insurance record.
- Visit https://www.gov.uk/check-state-pension to get a statement to show how much your new State Pension is likely to be.
At the same time, the standard rate of Pension Credit, which gives pensioners a guaranteed minimum income level, will increase to £155.60 a week for single people and £237.55 for couples.
The increase in the Pension Credit guarantee is partly being paid for by a reduction in Savings Credit (extra money if you’ve got some savings or your income is higher than the Basic State Pension). From April 2016 this will be a maximum of £13.07 a week extra if you’re single and up to £14.75 if you’re a couple. You won’t be eligible for Savings Credit if you reach State Pension age on or after 6 April 2016. Only those who reached State Pension age before this date may be eligible.
State Pension age
The current State Pension age for men is 65. For women it is gradually increasing from 60 to 65 and is currently 63. Legislation has been agreed by Parliament to increase State Pension age from 66 to 67 between 2026 and 2028. The Government has also announced the first of regular five-yearly reviews to look at State Pension age after that:
As previously announced, from April 2016, a new Personal Savings Allowance will mean that the first £1,000 of interest earned on savings will be tax free for basic rate taxpayers. For higher-rate taxpayers, the first £500 of interest will be tax free:
The ISA allowance for 2016/17 is frozen at £15,240. However, this will rise to £20,000 from April 2017. ISAs are also more flexible now, allowing you the freedom to withdraw and replace money in the same tax year without losing your ISA tax benefits.
The personal allowance is the amount of income you can receive before you pay tax. From April 2016 the basic personal allowance will rise to £11,000. This will further increase to £11,500 from April 2017.
Higher rate income tax threshold rise
The threshold at which people will pay higher rate income tax at 40% has risen from £42,385 to £43,000. From April 2017, this will rise again to £45,000.
If you drive, you’ll be happy that the Government has once again delayed a planned increase in fuel duty. This is the sixth year in a row that fuel duty has been frozen.
Beer, whisky, spirits and most cider duties have been frozen for 2016/17.
A new sugar tax on the soft drinks industry is to be introduced in two years time. This has been designed to encourage companies to reduce the amount of added sugar in the drinks they sell.
A spending cap of £115.20 billion on state benefits is in place for 2016/17. The cap does not include State Pensions or Jobseeker’s Allowance but will cover other social security benefits including Pension Credit, Attendance Allowance and Winter Fuel Payments.