Summer Budget 2015 – How will it affect you?

The main tax headlines from George Osborne’s Summer Budget are:

  • New Living Wage of £7.20/hr for over 25s to be introduced in 2016, which will be increased to £9/hr by 2020
  • A shake-up of the welfare system, with significant cuts to tax credits
  • Overhaul of dividend taxation which will result in higher tax liabilities for many family businesses from April 2016
  • Loan interest relief will be restricted to 20% for landlords renting out residential property, with the change to be phased in over 4 years, starting from April 2017
  • Landlords “wear and tear” allowance to be replaced by a new system in April 2016
  • Rent-a-room relief to be increased from £4,250 to £7,500 in April 2016
  • Income tax personal allowance to be increased from £10,600 to £11,000 in April 2016
  • Higher rate (40%) tax threshold to be increased from £42,385 to £43,000 in April 2016
  • Tax relief for pension contributions to be restricted from April 2016 for those earning over £150,000 per year
  • A significant increase in the Inheritance Tax threshold eventually to £500,000 (£1million for married couples), but phased increases don’t commence until 2017 and will only apply to a main residence that is left to children/grandchildren
  • Corporation tax rate to be reduced to 19% in April 2017 and to 18% in April 2020
  • Companies will no longer be able to claim tax relief on the goodwill amortisation associated with future business acquisitions
  • £500,000 Annual Investment Allowance to be reduced to £200,000 on 31 December 2015
  • 3 million new apprenticeships to be created by 2020, funded by a new levy on large employers
  • Employment Allowance to be increased to £3,000 from April 2016
  • 30 hours of free childcare for 3 and 4 year olds from September 2017
  • Student maintenance grants to be replaced with loans (from 2016/17 academic year)
  • Insurance Premium Tax to increase from 6% to 9.5% from November 2015
  • Bank levy to be phased out and replaced by a new additional 8% surcharge tax on profits
  • The favourable tax rules for “Non-Doms” will be largely removed from April 2017
  • Reform of road tax in 2017 and the extension of first MOT from 3 years to 4 years
  • Extra funds to be allocated to HMRC to counter tax evasion and aggressive tax planning
  • Government to consult on possible further radical changes to pensions

Overview – Whatever happened to tax simplification?!!

We think it is fair to say that George Osborne’s Summer Budget is one of the most ambitious and complex Budgets for many years.  Whilst many of the Chancellor’s announcements were expected, the proposed changes to dividend taxation was certainly a surprise and will represent increased tax liabilities for many family businesses (although he has partly softened this blow with a proposed future reduction in corporation tax rates).

Another big surprise was the announcement that the government is considering further fundamental changes to pensions, with a view to making pensions more like ISAs!  Thankfully the government is firstly entering into a period of consultation before making any definite decision on this change – which will be very welcome news for the pensions industry as they are still playing catch-up with last year’s radical pension changes.

There are a number of other significant reforms (e.g. the tax reliefs for buy-to-let landlords, inheritance tax changes and tax relief changes on business acquisitions), which will affect many individuals and businesses and which will have to be carefully considered.  Watch this space as we keep you informed of the impact of these important changes!

We have heard many governments talk about their desire to simplify the UK tax system (and more latterly even mention the desire to abolish personal tax returns!), but we have seen very little over the years to persuade us that this is ever going to happen and the latest Budget only supports this view.  And somewhat ironically, the new dividends tax will actually increase the number of tax returns that will now have to be submitted to HMRC each year!

Please click here if you would prefer to read and download our Summer Budget 2015 highlights as a pdf.

To read how the new dividends tax might affect you please click here.

Click on the headings below to read further information on the affects of today’s announcements:

If you have any queries on the 2015 Summer Budget please do not hesitate to contact one of our tax specialists on 01228 530913 or 01768 864466.

Alternatively if you have any queries regarding any financial advice matters please contact Nathan Glaister from our brand new Dodd Wealthcare team on 01228 530913. 

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