Please find a summary of the 2015 Summer Budget. As always there is plenty of small details to digest but we thought you’d like to see a summary of the headlines.
For ease of navigation we have listed each topic we have summarised below. We have also avoided pictures in order to make the copy lower cost to print should you prefer to.
Topics
- Income Tax
- Pensions
- National Insurance Contributions
- Inheritance Tax
- Corporation Tax
- Tax Simplification
- Tax Avoidance
- Savings and Investments
- Capital Gains Tax
- Property Tax
- Trust Tax
INCOME TAX
♣From April 2016, government will increase the personal allowance from £10,600 to £11,000.
♣ The personal allowance will further increase to £11,200 in 2017/18.
♣ The basic rate limit will increase to £32,000 for 16/17 and £32,400 for 17/18. As a result the higher rate threshold will increase to £43,000 and £43,600 respectively.
♣ Legislation will be introduced which will provide that the basic, higher and additional rates of income tax will not increase above 20%, 40% and 45% respectively for the duration of this parliament.
♣ The dividend tax credit will be replaced by a £5k tax free dividend allowance for all taxpayers from April 2016. The dividend tax rates will be set at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
♣ From April 2016, the government will increase the rent-a-room relief from £4,250 to £7,500 a year.
♣ Finance costs will be restricted on buy-to-let residential properties to the basic rate of income tax gradually from 6 April 2017.
♣ When the personal allowance reaches £12,500 it will be indexed.
PENSIONS
♣ Lifetime Allowance reduction to £1m confirmed from April 2016.
♣ Also to be indexed annually in line with CPI from 6 April 2018.
♣ Allowance for adjusted earnings £150k+ tapered to a minimum of £10k at £210k from April 2016.
♣ Immediate changes to Pension Input Periods.
♣ Secondary annuity market delayed until 2017.
♣ Consultation launched on reforming pension tax relief.
♣ Tax rate on lump sum payable on death after age 75 reduced to marginal rate of recipient from April 2016.
NATIONAL INSURANCE
♣ The Class 1 NIC rates are to be frozen for the duration of this Parliament.
♣ The Employment Allowance is increased to £3,000 from 6 April 2016.
♣ The government will consult on abolishing Class 2 NICs and reforming Class 4 NICs for the self-employed.
♣ The government is to actively monitor the growth of salary sacrifice arrangements.
INHERITANCE TAX
♣ A new “main residence nil rate band” will be introduced from 04/17 to protect the family home from IHT.
♣ This will be £200k in 17/18, £125k in 18/19, £150k in 19/20 and £175k in 20/21. Special rules will apply to protect those who downsize.
♣ The government will continue to freeze the nil-rate band at £325k until 04/21.
♣ Government will legislate to ensure that from 04/17, IHT is payable on all UK residential property owned by non-doms – regardless of residence status for tax purposes.
♣ From 04/17 the point someone classed as non-dom is domiciled for IHT purposes will be reduced to 15 out of 20 years. In addition, individuals who were born in the UK to parents who are domiciled here, will be treated as UK domiciled whilst they are in the UK.
♣ From 04/17 government will also introduce new rules so that everybody who owns residential property in the UK and would otherwise pay inheritance tax on that property cannot avoid paying it by holding it in an offshore structure.
CORPORATION TAX
♣ The corporation tax rate will fall to 19% for Financial Year beginning 1 April 2017 and to 18% for Financial Year beginning 1 April 2020.
♣ There will be a restriction of loss relief for controlled foreign companies.
♣ There will be a restriction of relief for business goodwill amortisation.
TAX SIMPLIFICATION
♣ Government remains committed to the process of simplification.
♣ The Office of Tax Simplification will be made permanent.
♣ A number of consultations will take place shortly (including alignment of tax and NIC and abolishing Class 2 NICs).
♣ Commitment to introducing digital accounts to remove the need for individuals and small businesses to complete annual tax returns.
TAX AVOIDANCE
♣ Continued action to target evasion.
♣ Legislation to implement direct recover of debts.
♣ GAAR to be strengthened.
♣ Serial avoiders to be named and shamed.
♣ Consultation on IR35 reform.
♣ Additional HMRC resource to target non-compliance by wealthy individuals.
♣ Advisers required to notify clients to fulfil responsibility to declare offshore income/gains.
SAVINGS AND INVESTMENTS
♣ Tax free personal savings allowance of £5k for savings income to be introduced from April 2016.
♣ From Autumn 2015 a ‘Help to Buy ISA’ is to become available for first time home buyers.
♣ Further VCT / EIS limitations to be introduced.
♣ New dividend tax rates to be introduced from April 2016 for basic, higher and additional rate taxpayers.
CAPITAL GAINS TAX
♣ The government will stop investment fund managers from using tax loopholes to avoid paying the correct amount of Capital Gains Tax on the profits of the fund payable to them (known as carried interest).
PROPERTY TAX
♣ Government will restrict the amount of Income Tax relief landlords can get on residential property finance costs to the basic rate of tax.
♣ From 04/16 the ‘wear and tear’ allowance will be replaced by a new system that only allows landlords to get tax relief when replacing furnishings.
♣ The level of rent-a-room relief will be increased to £7,500 per years as of 6 April 2016.
♣ Government intends to amend rules on excluded property so that trusts or individuals owning UK residential property through an offshore vehicle will pay IHT on the value of such UK property in the same was as UK domiciled individuals.
♣ From 04/17, individuals will be offered a family home allowance so they can pass their home on to children / grandchildren tax free after their death.
TRUST TAX
♣ Draft legislation on ‘same day addition rules’ will be included in the 2015 Summer Finance Bill – applying to trusts created after 10/12/14.
♣ From 6/4/16, where income causes discretionary trustees to exceed their standard rate band, they are expected to pay a tax rate of 38.1% on the dividends they receive. Single premium bonds will be attractive tax efficient wrappers where the trustees require the underlying investments to be equities generating a reasonable yield.
♣ Trustees will continue to pay 28% on capital gains, subject to their annual exemption from 6 April 2015 of, generally, £5,550.
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