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.
- 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.
- 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.
- 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.
- 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second change is that the 10% wear and tear allowance available for landlords letting fully furnished property will be withdrawn from 6th April 2016 and replaced with an allowance for renewals.
- CORPORATION TAX
The rate of corporation tax currently 20% will be cut to 19% from 1st April 2017 and 18% from 1st April 2020.
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From 6th April 2016 the 10% tax credit attaching to dividends will be withdrawn and replaced with an additional 7.5% tax charge for basic rate, higher rate, and additional rate taxpayers.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.
- 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.
- 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.