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Budget 2015: What advisers can expect

Chancellor George Osborne is set to reform tax allowances and take aim at the pensions industry once again in what will be his final Budget of the coalition Government.

The Government has already confirmed plans to allow savers to cash-in their annuities, and will begin consulting from today on how to extend pension freedoms to existing annuity holders from April 2016.

Current plans will not give annuity holders the right to sell their policy back to their original provider, and the Government has said it is unlikely to allow the original annuity provider to purchase, and then discontinue, customer annuities.

But the Treasury says it will also seek to consult on who should buy annuity income, and says it does not consider it to be an appropriate investment for retail investors, citing the complexity and difficulty in determining a fair price.

The Tories are also set to announce plans to scrap annual paper tax returns in favour of a drive towards digital records that can be accessed at any time.

The systems will reportedly work like online bank accounts, keeping an up to the minute record of all tax owed or paid.

The Daily Mail reports that by early 2016, all five million small businesses and the first ten million individuals will have access to digital tax accounts.

All businesses in the UK and 55 million individuals will have one by the end of the next Parliament. Those who have difficulty gaining access to the internet will continue to be allowed to submit paper returns, or be offered support.

Separately, it has been reported Osborne will reduce the lifetime allowance on tax-free pension savings from £1.25m to £1m.

It would mark another reduction in the tax-free ceiling, after the Chancellor cut the limit from £1.5m in April last year. 

The move follows similar plans from both the Lib Dems and Labour, with the latter pledging to use savings to fund a reduction in university tuition fees.

There may also be increases to the personal allowance threshold. The personal allowance was already due to rise from £10,000 to £10,600 from April, and it has been suggested the Chancellor will raise ita again to at least £10,800.

Basic rate taxpayers are set to save up to £160 a year from the change, while the Treasury would lose more than £1.3bn if higher-rate taxpayers are also included.

Also unveiled early was the commitment to a review of business rates in time for the 2016 Budget.

It follows an Autumn Statement promise to review rates, which came with a particular emphasis on reducing the cost of rates for small and high street businesses.

Osborne may also flag a Conservative commitment to reform rules around inheritance tax.

The Tory plan would reportedly see a new tax-free band worth £175,000 per person created on a family home.

The new nil-rate band would be transferable between married couples, making it worth a maximum of £350,000.

It would apply to the value of a family home or other main residence transferred to a direct descendant of the deceased, including step-children and adopted children.

The new threshold would be added to the current IHT threshold, where no tax is paid on the first £325,000 of the value of an estate.

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