Summer Budget 2015 summary

As you are all aware, today was the Summer Budget. Here is a summary of the main proposals.

Personal Taxation

Personal Allowance

The tax free personal allowance will increase to £11,000 in the 2016-17 tax year.

In 2017-18, the personal allowance will be set at £11,200.

Tax Year                     Personal Allowance
2015-16                                   £10,600
2016-17                                   £11,000
2017-18                                   £11,200

Higher rate tax threshold

This is the threshold before an individual begins to pay tax at the higher rate of tax. This threshold will increase to £43,000 in 2015-16 and £43,600 in 2017-18 from the current level of £42,385.

Tax Year                                 Threshold
2015-16                                   £42,385
2016-17                                   £43,000
2017-18                                   £43,600

Taxation of Dividends

This is a fundamental reform of the taxation of dividends.

There will be a new Dividend Tax Allowance of £5,000 introduced for 2016-17. Dividends received in excess (or as it appears to be phrased) of the allowance will be liable to tax at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. We still await further clarification on the exact calculation method.

The 10% notional tax credit will be abolished from April 2016.

Pension Tax Relief

The Government will undertake a consultation to reform pensions tax relief.

The annual allowance for individuals with income above £150,000 will begin to be tapered down to a minimum of £10,000.

Landlords (Individuals)

There are a number of proposals set out by the Government.

Rent-a-Room Relief

The Rent-a-Room Scheme lets you earn up to a threshold of £4,250 per year tax-free from letting out furnished accommodation in your home. This threshold will increase to £7,500 from April 2016.

Wear & Tear Allowance

This is an allowance that can be claimed by landlords that let out residential furnished accommodation (except furnished holiday lets). This will be replaced from April 2016 with a new relief. Details have yet to be published.

Mortgage/Loan interest relief

The Government will restrict mortgage interest relief to the basic rate of tax. The restriction will be phased in over 4 years starting from April 2017.


Employment Allowance

The Employment Allowance was introduced last year for businesses and charities. This allowance can reduce an employer’s NIC liability by up to £2,000. The allowance will increase to £3,000 from April 2016.

National Living Wage

This will be introduced from April 2016 and will be set at £7.20 per hour. This replaces the National Minimum Wage.

This will be £9 per hour from 2020.

Inheritance Tax (“IHT”)

Nil Rate Band Level

The nil rate band is an IHT allowance. The Government has confirmed that the allowance will remain at £325,000 until April 2021.

Main Residence Nil Rate Band

A new additional nil rate band will be introduced from April 2017 when a residence is passed on death to direct descendants such as children.

This new nil rate band will be initially set at £100,000 and any unused band can be transferred to the surviving spouse or civil partner.

There will be tapered withdrawal of the allowance for estates with a net value of more than £2 million.

Residential property owned by non-UK domiciled individuals

Domicile is a common law concept and is quite separate to residence and nationality. An individual’s domicile is usually the country their father considered his permanent home when they were born. It may have changed if they moved abroad and don’t intend to return.

Being non-UK domiciled means a person is liable to UK IHT on UK situated assets such as UK property. Currently non domiciled individuals are able to avoid IHT on property by using offshore structures such as overseas companies to directly own the land/building rather themselves personally.

From April 2017, all non-domiciles will be liable to IHT on UK property even if it is held and owned through offshore structures.

Deemed domicile status

If you are non-UK domiciled but have been resident in the UK for at least 17 out of 20 years, you are treated as ‘deemed UK domiciled’. From April 2017 you will be treated as deemed domiciled for IHT purposes if you have been resident for 15 out of 20 years.

This will also affect individuals wishing to claim the remittance basis of taxation. The proposals will mean that from their 16th tax year of UK residence long term residents will no longer be able to access the remittance basis and will be subject to tax on an arising basis on their worldwide personal income and gains.

Corporation Tax and Business Tax

Corporation Tax (“CT”) Rates

The corporation tax rate will fall from 20% to 19% from April 2017 and then to 18% from April 2020.

Annual Investment Allowance (“AIA”)

The rate was set to fall to £25,000 from January 2016 but as promised in last Budget, the limit is set at a higher limit of £200,000.

Amortisation of goodwill – CT Relief

Corporation tax relief will be restricted on the cost of goodwill acquired with a business. This will affect all acquisitions and disposals on or after 8 July 2015.

Corporation Tax Payment Dates

New CT payment dates will be introduced for accounting period beginning on or after 1 April 2017 for companies with taxable profits of £20 million or more. The £20M threshold will be divided by the number of companies in the group.

Companies affected will have to pay the tax under the quarterly instalment regime in the 3rd, 6th, 9th and 12th month of their accounting period.

Indirect Tax

Insurance Premium Tax (“IPT”)

From 1 November the standard rate of IPT will increase to 9.5% from 6%. This is likely to increase the cost of certain insurance policies.

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