Budget 2015 - Headline Announcements
Budget 2015 – ‘Britain is walking tall again’
Being so close to May’s General Election, it was inevitable that the Chancellor’s Budget speech would focus heavily on economic growth in the UK. However, in terms of actual measures, apart from one or two surprise announcements, this Budget confirmed much of what had been outlined in the Autumn Statement last December.
Personal Tax and National Insurance Contributions (NICs)
• The Personal Allowance will increase to £10,600 from 6 April 2015, and will rise to £10,800 in 2016.
• The basic rate (20%) limit will be £31,785 for the 2015/16 tax year, meaning individuals can earn up to £42,385 before paying 40% tax.
• NICs upper earnings and upper profits limits will increase in line with the basic rate limit.
• NICs will be abolished for apprentices under the age of 25, where they earn up to the Upper Earnings Limit. This measure will take effect from 6 April 2016.
• NICs will be abolished for workers under the age of 21, where they earn up to the Upper Earnings Limit. This takes effect from 6 April 2015.
• There are plans to abolish Class 2 NICs after the election later this year.
• The Blind Person’s Allowance, Married Couples Allowance and income limits for the allowances will increase from 6 April 2015 in line with the RPI.
• A new relief is being introduced in the 2015/16 tax year with regard to investments made via the peer to peer (P2P) lending industry. The relief will allow the offset of losses from P2P loans against other P2P income.
• A new annual charge of £90,000 will be introduced from April 2015 for UK resident, but non-UK domiciled individuals who have been resident in the UK for 17 out of the last 20 years, and wish to claim the remittance basis of taxation.
• Non-UK domiciled individuals who have been resident in the UK for more than 12 out of the last 14 years and wish to claim the remittance basis of taxation will see the annual charge increase from £50,000 to £60,000.
Taxation of pensions and savings
• The investment limit for NS&I Premium Bonds will increase from £30,000 to £50,000 with effect from 1 June 2015.
• Available to first time buyers, a new Help to Buy ISA will be introduced to assist those wishing to get on the property ladder. Savers will receive 25% of the amount saved, so for each £200 saved in the ISA the government will contribute £50, to a maximum of £3,000 per person.
• Additional flexibility from April 2016 for people who are already receiving an income from an annuity; to enable more freedom in terms of pensioners being able to use the capital as they want.
• From April 2015, beneficiaries of a person who dies under the age of 75, with a joint life or guaranteed term annuity, and of which no payments have been made to the beneficiary prior to 6 April 2015, will receive future payments tax free.
• From 6 April 2016 an allowance will be introduced to remove tax on up to £1,000 of savings for basic rate tax payers, £500 on higher rate, and no allowance for additional rate tax payers.
• Savers will be able to withdraw and replace money from their ISA each year without forgoing the subscription limit, implementation likely to be in Autumn 2015.
• Lifetime Allowance for pension contributions is to be reduced from £1.25 million to £1 million from 6 April 2016.
Capital Gains Tax
• The government will address use of the Entrepreneurs’ Relief rules for tax planning which is not in keeping with the policy intention. Restrictions will be introduced to the application of the relief.
• PPR will be restricted in circumstances where a property is located in a jurisdiction in which a taxpayer is not tax resident.
Inheritance tax (IHT) and trusts
• Following a consultation launched after Budget 2014 with regards to the reforms to the taxation of trusts, the government will not introduce measures which restrict the nil rate band to one per Settlor. It is proposed that other anti-avoidance measures will be implemented to counter the use of multiple trusts.
• The simplification of the IHT calculation for trusts will come into effect from 6 April 2015, as planned.
• The government will review the use of deeds of variation for tax purposes.
• Following a consultation, it is proposed that the current Self-Assessment system will be abolished.
• Instead, a system of digital tax accounts will be introduced which will remove the need for individuals and small businesses to complete annual tax returns. This will include a new payment process, which will enable tax and NIC to be collected via an online account as opposed to self-assessment.
• It is proposed that the administration of employee benefits and expenses will also be simplified.
• Main and small company rates of Corporation tax aligned at 20% from 1 April 2015.
• Further anti-avoidance legislation will be introduced in relation to the use of historic tax losses and certain capital allowances.
• The Chancellor confirmed that following strong lobbying from business, a return to the £25,000 limit for annual investment allowance would not be acceptable and has hinted that a full scale review will be taken later this year, to ensure that the AIA did not return abruptly to such a low level from the current tax relief of £500,000.
• Travel and subsistence costs to be restricted for workers engaged through umbrella companies from 6 April 2016. The government also wants to see greater transparency from the intermediaries to the worker in terms of their employment status and what they are paid. Further consultations on these to take place later in the year.
• Business Rates system to be reviewed in full after the General Election.
Avoidance and evasion
Further anti-avoidance measures were announced, including:
• Proposals for a new criminal charge for tax payers undertaking tax evasion. Criminal charges will also apply to accountants and advisers aiding and abetting taxpayers in tax evasion.
• An additional 21,000 Accelerated Payment Notices will be issued, over and above the original estimated number.
• Proposals to improve the Disclosure of Tax Avoidance Schemes (DOTAS) regime, to make it more robust.
Our full summary of Budget 2015 can be accessed here.
If you would like to discuss any of these matters or talk to us about your tax affairs in general, please contact our Tax Partner, Chris Barrington on the details below:
telephone: 01942 292505