The key tax announcements of Chancellor George Osborne in his 8 July 2015 Budget.
In his second Budget for the year and the first Conservative Budget since 1996, Mr Osborne honoured his party’s election manifesto promises on tax changes and welfare cuts, and in so doing sought to rebalance the scales between size of the state and the wealth of the citizen
He said it was a Budget for working people and will benefit the whole country. “This is the new settlement”, he says. “A Budget that sets out a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create.”.
The Budget is predicted to be in Surplus by 2019/20.
The key announcements were:
- Tax avoidance – HMRC given £750m extra to tackle avoidance
Reform of controlled foreign companies regime
Review disguised employment when working through personal service companies
Non domiciliaries – from today people born in the UK but with non dom parents cannot claim non dom status themselves
Non dom tax status abolished from April 2017 for anyone who has been resident in the UK for 15 of the past 20 years.
Claims management companies charges to be capped
New 8% surcharge on bank profits from next year. Bank levy will be phased out
Reform of Vehicle Excise Duty for new cars from 2017
Fuel duty will remain frozen this year
Insurance premium tax will be raised to 9.5% from November.
New enterprise zones for small towns
Buy to let landlords – tax relief on interest payments to be restricted to basic rate of income tax over a 4 year period from 2017
Rent a Room allowance to be extended to £7,500 from April 2016
Inheritance tax – from 2017 there will be phased in a £175,000 allowance against the home. You can pass on up to £1m free of inheritance tax for couples.
The inheritance tax nil-rate band is currently frozen at £325,000 until April 2018 and will now remain frozen at that amount until April 2021
Pension tax relief – from 2016 the contribution annual allowance will be tapered down to £10,000 for those earning more than £150,000, as widely predicted
Green paper on pensions – pensions could be taxed like ISAs
Secondary market for pension annuities delayed until 2017
Annual Investment Allowance – set at £200,000 permanently from 1 January 2016
The Dividend Tax Credit abolished from April 2016 and replaced with a new Dividend Tax Allowance of £5,000 a year. The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. Dividends in ISAs not affected
Corporation tax reduced to 19% in 2017 and 18% by 2020
Corporation tax relief a company obtains for the cost of ‘goodwill’ will be restricted for all acquisitions and disposals on or after 8 July 2015.
Freeze working aged benefits for 4 years
Benefits cap reduced to £23,000 in London and £20,000 outside London
Lower earnings limit for gradual withdrawal of tax credits
Limit support for tax credits and universal credit to 2 children from April 2017 for new claimants
Similar changes for housing benefits for children born after April 2016
Income tax personal allowance – £11,000 from 2016/17
Higher rate threshold – £43,000 from 2016/17
No changes in the rates of income tax
The government will proceed with powers to allow HM Revenue & Customs to directly recover tax debts of over £1,000 from bank accounts (including ISAs), subject to safeguards.
Commitment to spend 2% of GDP on defence
National Living Wage for over 25s to be £9 per hour by 2020, starting next year at £7.20 (offset by rate reduction in corporation tax)
Employment allowance increased by 50% to £3,000 from 2016 to enable up to 4 people to be employed on the National Living Wage without extra cost to the employer.