The Chancellor of the Exchequer gave his Budget to Parliament on Wednesday 8 July 2015. John Fox from our Wellington Office provides an overview and the implications of the summer budget.
Key Points for Small business Owners
- General confidence in the growth of the economy, and expectation of creating a further one million jobs by 2020
- Annual increase in the Minimum Wage of 6% from April 2016 through to 2020.
- Corporation tax to be 19% in 2017 and 18% in 2018
- Insurance Premium Tax up from 6% to 9.5%
- New Apprenticeship levy for large employers
- Employment Allowance increased to £3,000 from 5 April 2016, but it will not be available to companies where the director is the sole employee.
- The annual investment allowance, which has previously been increased temporarily, will be set permanently at £200,000 from January 2016. Immediately prior to that it has been £500,000, but was scheduled to revert to £25,000.
- Corporation tax relief for Goodwill amortisation to be ended
Key Points for Personal Income Taxpayers
- Modest increases in Personal Allowance and Basic Rate Band for 2016-17 and a commitment that the Personal Allowance will reach £12,500 and the higher rate income threshold £50,000 by the end of the parliament.
- The dividend tax credit (which reduces the amount of tax paid on income from shares) will be replaced by a new £5,000 tax-free dividend allowance for all taxpayers from April 2016. Tax rates on dividend income will be increased. This simpler system will mean that only those with significant dividend income will pay more tax. Investors with modest income from shares will see either a tax cut or no change in the amount of tax they owe.
- Restricted tax relief on pension contributions for those with an income over £150,000.
- Tax relief on interest for Buy to Let properties is to be restricted to basic rate.
- The Wear and Tear Allowance for furnished letting will be abolished and replaced by relief when furnishings are replaced.
- Permanent non-dom status will be abolished from April 2017. From that date, anyone who’s been resident in the UK for 15 of the past 20 years will be considered UK-domiciled for tax purposes.
- Rent-a-room relief to increase from £4,250 to ££7,500.
- Currently, Inheritance Tax is charged at 40% on estates over the tax-free allowance of £325,000 per person.
- Married couples and civil partners can pass any unused allowance on to one another.
- From April 2017, each individual will be offered a family home allowance so they can pass their home on to their children or grandchildren tax-free after their death.
- This will be phased in from 2017-18. The family home allowance will be added to the existing £325,000 Inheritance Tax threshold, meaning the total tax-free allowance for a surviving spouse or civil partner will be up to £1 million in 2020-21.
- The allowance will be gradually withdrawn for estates worth more than £2 million. The allowance will be available when a person has downsized or ceased to own a home.