2015 Budget Highlights

This is the last Budget before the 2015 General Election. Here are the highlights.

Personal Taxation

Personal Allowance

The personal allowance will continue to increase. The rates for 2015-16, 2016-17 and 2017-18 will be as follows:

Tax YearPersonal Allowance
2015-16£10,600
2016-17£10,800
2017-18£11,000


Basic Rate and Higher Rate Band

For the last few years, these band have been slowly reduced. This meant that more people have been ‘dragged’ into paying tax at the higher rate.

For 2015-16, 2016-17 and 2017-18 the basic rate and higher rate tax bands will be increased.

Tax YearBasic Rate BandHigher Rate
2015-16£31,785£42,385
2016-17£31,900£42,700
2017-18£32,300£43,300


Personal Savings Allowance

This will be introduced from 6 April 2016. Savings income for basic taxpayers of amounts up to £1,000 of interest will not be liable to UK income tax.  For higher rate taxpayers the personal savings allowance will be £500. Additional rate taxpayers (i.e. 45%) will not benefit from this allowance.

Capital Gains Tax

Annual Exemption

The tax free annual allowance will increase by another £100 to £11,100 for the 2015-16 tax year.

Entrepreneurs’ relief (ER)

Personal assets such as a building will only benefit from ER if this is in connection with a disposal of at least a 5% shareholding in a company or a 5% share in a partnership.

Anti-avoidance rules have been introduced to ensure that disposals of shares in companies involved in joint ventures will only benefit from ER if they are trading themselves.

Both these measures have immediate effect.

Self-Employed

National Insurance Contributions (NIC)

The Government intend to abolish Class 2 NIC in the next Parliament.

Class 4 NIC will also be reformed but we await further details.

Farmers – Farmers Averaging

This is regime that allows farmers to calculate their taxable trade profits from farming by averaging profits over 2 years (although there are detailed conditions for this to apply). The period of averaging will be increased from 2 years to 5 years from 6 April 2016.

IHT and Trusts

Trust – Charges

When asset leave trusts, there are on many occasions an IHT charge. There is also a 10 year anniversary charge.

The calculation of the trusts charges will be “simplified”!

Deeds of Variation

A deed of variation is an instrument under which you can redirect your inheritance entitlement from the Will to another person or entity.

These have been used commonly as a post death tax planning instrument to reduce the IHT that may be payable. The use of ‘Deeds of Variation’ will be reviewed this autumn.

Pensions

Lifetime Allowance

The lifetime allowance will be reduced from 6 April 2016 to £1,000,000 (from £1,250,000)

The LTA is the overall amount of pension savings that you can have at retirement without incurring a tax charge.

Annuity Flexibility

The government will change the tax rules from April 2016 to allow people who are already receiving income from an annuity to sell that income to a third party.

Value Added Tax (VAT)

The compulsory VAT registration threshold will increase by a further £1,000 to £82,000 (date to be confirmed by Statutory Instrument).

The VAT deregistration threshold will also increase by a £1,000 to £80,000 (date to be confirmed by Statutory Instrument).

Excise Duty

Alcohol Duty

Beer will be cut by a £0.01.

Duty on cider will be cut by 2%.

Duty on wine will be frozen in cash terms.

Fuel Duty

The Fuel Duty increase planned for September this year has been cancelled.

Other News

National Minimum Wage

For adults aged 21 and over the National Minimum Wage (NMW) will increase from £6.50 to £6.70 per hour. This will take effect from 1 October 2015.

https://www.gov.uk/government/news/the-government-accepts-minimum-wage-rate-recommendations

The apprentice rate and rates for employees under 21 will also increase from October.

Individual Savings Accounts (ISAs)

Following a consultation this autumn regulations will be introduced to enable ISA savers to withdraw and replace money from their cash ISA without it counting towards their annual ISA subscription limit for the tax year.

A new ‘Help to Buy ISA’ will be introduced this autumn and is aimed at first time buyers. First time buyers that save up to £200 a month towards their first home with a Help to Buy ISA will have their savings boosted by 25% by the Government, providing the funds are used as a deposit on their first home. That’s a £50 bonus for every £200 saved. The maximum bonus is £3,000.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414027/FTB_factographic_final.pdf

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