Summer Budget 2015
Here is a summary of the main points of the Summer 2015 Budget.
Income Tax – 2016/17
The basic personal tax-free allowance will be in increased to £11,000 (restricted for income in excess of £100,000). This will increase further in 2017/18 to £11,200.
The first £32,000 of taxable income is to be taxed at 20% (other than dividends – see below)
The next £118,000 is taxable at 40% (or 32.5% for dividends). The balance over £150,000 is taxable at 45% (or 38.1% for dividends).
The government will abolish the Dividend Tax Credit from April 2016 and introduce 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.
Rental Property Expenses
The amount of tax relief on mortgage interest for rental properties will be restricted to the basic rate of tax. This will be phased in over 4 years starting in 2017/18 so that it takes effect by 2020/21.
Wear and Tear allowance will be replaced from April 2016 with a new relief which allows the actual cost of replacement furnishings to be deducted by all residential landlords.
National Living Wage
The Summer Budget introduces a new National Living Wage for over 25’s from April 2016. This will initially be £7.20 per hour and the intention is to increase this to £9 per hour by 2020.
Tax Rates For Savings
A new personal savings allowance will be introduced whereby the first £1,000 of interest received on savings will be tax free for basic rate taxpayers. A reduced £500 allowance is available for higher rate taxpayers.
From 6 April 2016, restrictions will be placed on the benefit of pension tax relief for people with income of over £150,000 (including the value of any pension contributions) and those with income in excess of £110,000 (excluding pension contributions).
This annual allowance of £40,000 will be tapered by reducing the allowance by £1 for every £2 that the individual’s income exceeds £150,000. A maximum restriction of £30,000 can apply to bring the annual allowance down to a minimum of £10,000.
The Employment Allowance, that is schedule to be introduced from April 2016, will be increased from £2,000 to £3,000.
The inheritance tax threshold has been increased to allow £1m homes to be passed down to children after death to be free of tax.
From 2017, there will be a new £175,000 allowance on homes left to children or grandchildren. The new allowance is in addition to the existing £325,000 threshold which will be fixed until the end of 2020-21, he said. Both allowances can be transferred to your spouse or partner.