2015 Budget Overview

9 July 2015

 Richard Sowler

The Chancellor of the Exchequer  presented his first Summer Budget to Parliament yesterday. Tax barrister Richard Sowler TD provides a useful  round-up of all the key points announced in yesterday's speech.

Finance Bill

The Finance Bill is to be published on 15 July

Income tax personal allowances

£11,000 for 2016-2017, indexed to Living Wage thereafter   Reducing the personal allowance to £12,500 now an 'ambition.

20% band £1 - £43,000 for 2016 - 2017

40% band £43,000 - £150,000 for 2016 - 2017

45% £150,000+

Legislation will be introduced to prevent any increase the rates of income tax, VAT or National Insurance contributions in this Parliament.  Rate bands and thresholds are not to be so exempted.

Corporation Tax

Rate reduced to 19% for 2017 - 2018, 18% for 2018 - 2019.  Earlier payment to be introduced

An apprenticeship levy to be imposed on large firms.

National Insurance contributions

It is proposed to abolish Class 2 NIc and reform Class 4, subject to a public consultation later this year.  The employment allowance, now £2,000 will increase to £3,000 from April 2016.

Personal Savings Allowance

The first £1,000 of interest income will be tax free for basic rate taxpayers.  For higher rate payers this exemption will be only £500 and nil for additional rate taxpayers.  Dividend tax credit abolished for 2016 - 2017 and £5,000 dividend income tax-free.  Tax on higher dividends above that to be higher, starting at 32.5%.

Non-domiciliaries

From April 2017 people who have been resident in the UK for 15 out of 20 years will lose non-dom treatment.

Banks

The rates of the bank levy will be reduced over the next six years.  Banks will pay additional tax on profits of 8% from January 2016.  UK banks' overseas subsidiaries exempt from the bank levy from January 2021.

Insurance

Insurance premium tax to increase to 9.5% from November 2015.

Property taxation

The rent-room-relief will rise from £4,250 to £7,500 from April 2016.

Interest deductions for residential landlords will be limited to basic rate (20%) by 2020.  Wear and tear allowance to be replaced by replacement deductions from April 2016.

Annual Investment Allowance 

To be reduced from £500,000 to £200,000 from January 2016 and be retained at that level going forward.

Pensions

Annual allowance to be phased down to £10,000 for additional rate taxpayers.  A green paper will be introduced to consider abolishing tax allowances on pension contributions, with a view to moving from the NNT (no tax on contributions or on the accumulating fund but taxed pension income) to TNN,

Inheritance tax

From April 2017 (rough on today's crumblies) there will be a new transferable main residence allowance of £175,000 for each parent leaving their home to their children or grandchildren. This will increase the IHT threshold from £325,000 to £500, 000,. The allowance will be tapered for those leaving a home worth more than £2 million, and unavailable for those leaving a home worth more than £2.35 million.  Down-sizers will be protected from loss of relief.  To be called: family home allowance'.

Excise duties

Vehicle Excise Duty from 2017 to target new cars, which will pay tax on CO2 emissions in the first year.  For others, three bands: Zero (for electric), Standard and Premium.  Standard starting at £140 per year.  Existing cars will not be affected. 

Fuel duty frozen for 2015.   

Evasion

£750,000 additional resource to HMRC to combat tax evasion, leading to:  

Tripling the number of criminal investigations HMRC can undertake into complex tax crime, concentrating on wealthy individuals and companies. 

Allowing HMRC to access more data to identify businesses that aren't declaring or paying tax

Clamping down on the organised crime gangs behind the illicit trade in tobacco and alcohol 

Tax avoidance

Penalties to be introduced for schemes falling foul of the General Anti-Abuse Rule. 

Further measures to prevent profit shifting out of the UK. 

New anti-avoidance measures for carried interest of fund managers. 

Restrictions (from 8 July 2015) on setting expenses against controlled foreign company charge. 

Further detailed restrictions on corporation tax reliefs.

 

This overview only deals in very broad outline with the salient points of the proposals and is not comprehensive.  No action should be taken or avoided in reliance on this document, or otherwise than in reliance on specific and detailed advice.

For a pdf version of this summary, please click here.

For further information, please contact Richard Sowler at rs@taxlaw.im or by telephone on 07624 235000, or Robert Mackenzie at rmk@taxlaw.im or by telephone on 07787422793.