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The Summer Budget

THE SUMMER BUDGET

 

George Osbourne presented his first budget under a majority conservative government on 8th July 2015. We focus in this blog on some of the key measures that we believe will be of interest to our clients.

  1. TAX RATES AND ALLOWANCES

Most of these for the 2016/17 year were announced in the March 2015 budget. A significant change was that the personal allowance previously set at £10,800 will in fact be £11,000. The next £32,000 of income is taxed at the basic rate, so an individual will start to pay higher rate tax when his income exceeds £43,000.

There is a commitment to increase the levels of £11,000 and £43,000 to £12,500 and £50,000 respectively during the current parliament.

 

  1. INHERITANCE TAX

     

    An additional nil rate band for a main residence is being phased in over 4 years from 6th April 2017 to the effect that a couple will in most cases from 6th April 2020 be able to leave up to £1m to their descendants free of IHT where the equity in a main residence is at least £350,000.

    This measure had been widely leaked ahead of the budget.

     

  2. PENSION CHANGES

     

    Another widely leaked measure is that from 6th April 2016 individuals who are potentially additional rate tax payers (their income plus pension contributions exceed £150,000) will see the amount they can contribute to pensions tapered down to a minimum of £10,000.

    The government also issued a consultation document seeking views on a proposal to withdraw tax relief from contributions and at the same time make withdrawals tax free.

     

  3. BUY TO LET LANDLORDS

     

    Two changes of note were announced which affect residential property. Higher rate tax relief on mortgage interest and related finance costs will be phased out over 4 years from 6th April 2017.

    The second change is that the 10% wear and tear allowance available for landlords letting fully furnished property will be withdrawn from 6th April 2016 and replaced with an allowance for renewals.

     

  4. CORPORATION TAX

     

    The rate of corporation tax currently 20% will be cut to 19% from 1st April 2017 and 18% from 1st April 2020.

     

  5. DIVIDENDS

     

    This measure was certainly not leaked.

    From 6th April 2016 the 10% tax credit attaching to dividends will be withdrawn and replaced with an additional 7.5% tax charge for basic rate, higher rate, and additional rate taxpayers. There will also be a £5000 tax free dividend allowance meaning that the first £5000 per annum of an individual’s dividend will be ignored for tax purposes.

  6. EMPLOYMENT ALLOWANCE

     

    This is being increased to £3000 from 6th April 2016, but will no longer be available to companies where the only employee is the director.

     

  7. TRAVELLING AND SUBSISTENCE FOR SITE BASED WORKERS

     

    As promised in the March 2015 budget a consultation document has been issued with a view to withdraw this relief from 6th April 2016 where an individual works under the supervision, direction of control of a client. It will be the client who decides whether the control relationship exists, and consultation seems to be limited to a consideration of who is responsible if the client states that a control relationship does not exist and HMRC later establish that is does.

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