Here is a summary of the main points of the March 2015 Budget:
Income Tax Rates and Thresholds
Income Tax 2015/16
- The basic personal tax-free allowance is £10,600 (restricted for income in excess of £100,000)
- The first £31,785 of taxable income is to be taxed at 20%.
- The next £118,215 is taxable at 40% (or 32.5% for dividends). The balance over £150,000 is taxable at 45% (or 37.5% for dividends).
- The effective higher rates of tax on net dividends received are 25% and 30.56% respectively.
- The tax rate applicable to trusts income (excluding dividends) is 45%.
- The national insurance minimum salary for 2015/16 will be £8,060 per annum.
Income Tax 2016/17
- The basic personal tax-free allowance is increased to £10,800 (restricted for income in excess of £100,000) with a further increase to £11,000 planned for 2017/18.
- The first £31,900 of taxable income is to be taxed at 20%.
- The next £118,100 is taxable at 40% (or 32.5% for dividends). The balance over £150,000 is taxable at 45% (or 37.5% for dividends).
- The effective higher rates and those rates for trusts are as above.
Age-related Personal Allowances
- For 2015/16 the age-related personal allowances available to people born before 6 April 1938 will be £10,660. The personal allowance for people born after 5 April 1938 will be the standard personal allowance of £10,600.
- The income limit for the personal age allowance has been increased to £27,700 in 2015/16 before it will be reduced by £1 for every £2 over the limit.
- From 2016/17 age-related personal allowances will be aligned with the standard personal allowance.
Transferable Tax Allowances for Married Couples
- For 2015/16, a spouse or civil partner who is not liable to income tax above the basic rate can transfer up to £1,060 of their personal allowance to their spouse/civil partner provided the recipient of the transfer is not liable to higher rate tax. This will generally only be beneficial where one spouse is non-working or a lower rate taxpayer.
- The transferable amount will increase to £1,080 for 2016/17 and £1,100 for 2017/18.
National Minimum Wage
- From October 2015, there will be an increase to the national minimum wage for employees aged 21 and over to £6.70 per hour.
- The rate for 16-17 year olds will increase to £3.87 per hour
- The rate for people aged 18-20 will become £5.30 per hour.
- The apprentice rate will be increased to £3.30 per hour.
Tax Rates for Savings
From 6 April 2015 the maximum amount of an eligible individual’s savings income that can qualify for the starting rate of tax for savings will be increased to £5,000 and the starting rate of tax will be reduced from 10% to 0%.
A new personal savings allowance will be introduced. For basic rate taxpayers the first £1,000 of interest received on savings will be tax free (a reduced £500 allowance is available for higher rate taxpayers).
Individual Savings Accounts (ISAs)
The ISA subscription limit for 2015/16 is currently £15,240, with no restriction on the proportion held as cash. There are new rules for a Fully Flexible ISA which will allow savers to withdraw their money and then put it back into the ISA later in the year without losing any of their tax free allowance.
A new Help to Buy ISA will be launched for first time buyers which will be Government backed. For every £200 saved for a deposit, the Government will top this up by £50.
The Junior ISA and Child Trust Fund subscription limits will be increased to £4,080.
- From April 2016, pensioners already in receipt of annuities will have the option to exchange part or all of these for a cash lump sum or alternative pension product. This new measure is extending a similar flexibility to existing pensioners as to new pensioners who, from April 2015, will have the choice of cashing in all or part of their pension funds upon retirement and will affect up to 5 million pensioners who were previously required to buy an annuity upon retirement. These proceeds will be taxed at the pensioner’s marginal rate of tax.
- From April 2015, if someone dies under the age of 75 without having drawn a joint life or guaranteed term annuity, their beneficiary can receive future payments free of tax. If the death occurs after 75, the payments will be subject to the beneficiary’s marginal rate of tax.
- The pension contribution lifetime allowance for tax relief will be decreased from £1.25m to £1m from 6 April 2016, thereby affecting pension savings for those with larger pension pots. There will however be transitional rules for those exceeding the allowance at this date. The lifetime allowance will be index-linked to the Consumer Prices Index with effect from 2018.
A review of the use of a deed of variation (altering the beneficiaries of a Will after death), with the intention of potentially reducing future inheritance tax liabilities, is to take place by Autumn 2015. New rules are also likely to be introduced to target the use of multiple trusts to avoid inheritance tax.
Class 1 NIC – Employee & Employer – rates & thresholds per week unless stated:
- Lower Earnings Limit – £112.00
- Upper Earnings Limit (UEL) for employees’ primary Class 1 NICs – £815.00
- Upper Accrual Point – £770.00
- Primary Threshold – £155.00
- Secondary Threshold – £156.00
Employee’s (primary) Class 1 contribution rates
- Weekly earnings above £155.01 to £815.00 (12%)
- Weekly earnings above £815.00 (2%)
Employer’s (secondary) Class 1 contribution rates
- Weekly earnings above £156.00 (13.8%)
Class 2 NIC
- Self employed NIC – £2.80
- Small earnings annual exemption level – £5,965
- The Chancellor has announced that class 2 NIC will be abolished in the future.
Class 4 NIC
- Annual profits below lower profits limit of £8,060 (Nil)
- Annual profits above £8,060 but below £42,385 (9%)
- Annual profits above upper profits limit of £42,385 (2%)
The £2,000 Employment Allowance introduced from April 2014 will be available for 2015/16. There have been some changes to the exclusions from the scheme, notably so an employer will be able to claim the allowance for care and support workers from 6 April 2015.
Capital Gains Tax
- The annual exemption for 2015/16 is £11,100.
- Entrepreneur’s Relief rules are to be tightened to target two areas of misuse of the relief:
- Where non-trading companies are involved in joint ventures; 2. Where personal assets used in a business are sold without a corresponding sale of at least 5% of the business itself.
- Any capital gains qualifying for Entrepreneur’s Relief which are deferred into Enterprise Investment Schemes or Social Investment Tax Relief Schemes will continue to qualify for Entrepreneur’s Relief when the gains are ultimately realised.
- Principal Private Residence relief will no longer be available on properties in countries in which the taxpayer does not meet the tax residency rules in that year.
Corporation Tax Rates
The main corporation tax rate will reduce to 20% from April 2015. This aligns the main rate and small companies’ rate of corporation tax and effectively removes the previous marginal rates of corporation tax.
The current annual investment allowance of £500,000 is due to be reduced from 1 January 2016 and the actual amount will be confirmed in the 2015 Autumn Statement.
Company Car and Fuel Benefit
The appropriate percentage of a car’s list price that is subject to tax will increase by 3% for all cars in 2019/20, up to a maximum of 37%.
Research & Development Tax Credit
- from 1 April 2015, the rate of R&D enhanced deduction for Small Medium Enterprises (SME’s) will increase from 225% to 230%.The repayable tax credit for loss making SME’s will remain at 14.5%.
- The Government has announced that smaller businesses making a first claim will from Autumn 2015 be able to apply for voluntary advanced assurance that their claim is valid, which will last 3 years. They are also committed to reducing the time taken to process a R&D claim from 2016.
From 1 April 2015, the registration limit has been increased from £81,000 to £82,000 and the de-registration limit has been increased from £79,000 to £80,000.
The standard rate of landfill tax will increase by £2.40 per tonne to £85.00 per tonne from 1 April 2016 in line with the Retail Prices Index.