Set out below is a brief summary of some of the headline personal tax points arising from George Osborne’s Budget on 18 March:-
- The basic personal allowance will be increased to £10,800 in 2016/17, and £11,000 in 2017/18.
- The basic rate limit will be increased to £31,900 for 2016/17 and £32,300 for 2017/18.
- From April 2016 basic rate taxpayers will not have to pay tax on the first £1,000 of interest they earn on their savings. Higher rate taxpayers (those earning above £42,700) will not have to pay tax on the first £500 of interest.
- The new marriage allowance will permit transfer of personal allowance to a partner. If annual income is less than £10,600 in the 2015/16 tax year, this could produce a tax saving of up to £212.
- It is being proposed that the annual tax return will be phased out, being replaced by “digital tax accounts”.
- A new type of Individual Savings Account (ISA) is to be introduced to assist first-time buyers. It will be possible to save up to £200 a month towards a first home with a “Help to Buy” ISA, with the government adding a 25% bonus.
- Subject to technical consultation with ISA providers, from this autumn it will be possible for individuals to withdraw and replace money in their cash ISA within the same year without the replacement funds counting towards their annual ISA subscription limit (£15,240 for 2015/16).
- The lifetime allowance for pension pots is to be reduced from £1.25 million to £1 million from April 2016.
- Further pension reforms are to be introduced from April 2016, removing restrictions on the purchase and sale of existing annuities.
- Class 2 national insurance contributions for the self-employed are to be abolished entirely over the life of the next parliament. Consultation will be undertaken on Class 4 being made a contributory benefit.
- The amount of small donations for which charities can get an extra 25% top up Gift Aid payment, without the need for paperwork, is increasing from £5,000 to £8,000 a year.
- Farmers are to be allowed, from April 2016, to average profits for tax purposes over a period of five tax years to deal with volatility in the market. Averaging is currently available over two tax years.
- As regards capital gains tax, Entrepreneurs Relief on associated disposals is to be restricted on or after 18th March 2015. This will affect individuals and members of partnerships who sell personal assets used in a business, but do not, at the same time, dispose of a significant holding of shares in the entity carrying on the business.
- Similarly, Entrepreneurs Relief is to be denied on a disposal of shares in a company that is not a trading company in its own right. This will affect individuals who do not hold at least a 5% stake directly in a company carrying on a trade.
- There is to be a government review of what the Chancellor described as attempts to avoid inheritance tax through the use of deeds of variation. This review is expected to report by the autumn, and it will look at cases where individuals use deeds of variation to alter a Will in order to pass their bequests on to their children, thereby removing sums from inheritance tax within their estates.
- Regulations are to be introduced to require UK financial institutions to identify accounts maintained by those who are tax resident in jurisdictions with which the UK has entered into an agreement to exchange information to help tackle tax evasion, and to collect and report information to HM Revenue and Customs. The regulations also revoke and replace the current implementing regulations for the UK’s exchange of information agreement with the United States of America, known as FATCA.
- Tougher measures are to be set for those who persistently enter into tax avoidance schemes which fail (“serial avoiders”). Legislation is also proposed to widen the current scope of the Promoters of Tax Avoidance Schemes regime, by bringing in promoters whose schemes regularly fail.
Please contact us at firstname.lastname@example.org, or through your usual Saffron contact, if you would like to discuss the Budget further.