On 8th July 2015 the Chancellor presented his first budget of this Parliament.
Business Tax
Corporation Tax will be reduced by 1% to 19% for the years beginning on 1.4.17, 1.4.18 and 1.4.19. A further 1% reduction will apply from 1.4.20 making the rate 18%.
Annual Investment Allowance has been changed with the rate set at £200,000 per year commencing from 1.1.16. The current allowance of £500,000 remains in place until 31.1.15.
Personal Tax
The personal allowance will increase to £11,000 on 6.4.16 and £11,200 on 6.4.17.
The higher rate (40% tax) threshold will increase to £43,000 on 6.4.16 and £43,600 on 6.4.17.
A new personal savings allowance will be introduced from 6.4.16 and will mean basic rate taxpayers can receive up to £1,000 of savings income tax free while higher rate tax payers can receive £500.
From 6.4.16 a change to the way dividends are taxed will be introduced. The current tax credit will be removed and replaced with a £5,000 dividend allowance. Dividends above £5,000 will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate (45%) taxpayers. Please see our separate article to follow.
On buy to let properties the amount of income tax relief on finance costs will be restricted to the basic rate. This will be phased in from 6.4.17 over the following four years. The restriction will not apply to furnished holiday lettings. Also from 6.4.16 the Wear and Tear allowance on furnished residential property will be replaced by the actual costs of replacing furnishings. There will also be an increase in Rent-a-Room relief from £4,250 to £7,500 from 6.4.16.
Inheritance Tax
An additional nil rate band where a residence is passed down to direct descendants will be introduced. From 6.4.17 this will be £100,000, from 6.4.18 £125,000, from 6.4.19 £150,000 and from 6.4.20 £175,000. These allowances can be transferred to the surviving spouse or civil partner. This potentially increases the the IHT nil rate band to £1 million for a couple from 6.4.20.
Other Changes
From 6.4.16 a new minimum wage will be introduced for those aged 25 and above. This will be set at £7.20 per hour.
The Employment Allowance will increase from 6.4.16 to £3,000 per year but will no longer be available to companies where the director is the sole employee.
