George Osborne, the Chancellor of the Exchequer, delivered the Budget on Wednesday 18th March. Although no big rabbits were produced from his hat, several small ones emerged. The underlying theme was to remain committed to growth built on solid foundations of manufacturing and trade rather than borrowing and inflated property prices. The Government’s aim is to reduce the budget deficit in the short term and the national debt in the longer term.
The Budget contained further relaxation of the rules on pensions and ISAs. The Chancellor also announced more deterrents to the promotion and implementation of “artificial” tax avoidance schemes. The Budget contained more micro-economic proposals than any previous Budget, many addressing purely local and niche-market concerns.
Personal Taxes and Savings
The personal income tax allowance will rise to £10,800 from 6 April 2016 and to £11,000 from 6 April 2017. The basic rate limit will reduce to £31,900 from 6 April 2016, resulting in a higher rate threshold of £42,700.
The transferable tax allowance for non-taxpaying spouses and civil partners will rise from £1,000 to £1,050 with effect from 6 April 2015.
The starting level of savings of individuals with a total income of £15,500 or less on which income tax is chargeable will rise to £5,000 with effect from 6 April 2015 and the rate of tax below this level will be zero.
Restrictions will be placed on venture capital schemes to ensure that all new investors are independent from the company and that the purpose of investment is to develop and grow a business. Further limits on investment will also be introduced.
A new Personal Savings Allowance will be introduced to remove tax on up to £1,000 per year of savings income for basic rate taxpayers and £500 per year for higher rate taxpayers.
Taxpayers will be able to withdraw savings from ISAs and reinvest the amount withdrawn at a later date without losing the tax benefits. This change is expected to be implemented in autumn 2015.
Individuals will in future not be required to complete an annual tax return, which will be replaced by online digital tax accounts. Further details will be announced.
The annual charge for non-domiciles in the UK who wish to claim the remittance basis for taxation will increase to £90,000 for those who have been resident for 17 out of the last 20 years, with effect from 6 April 2016. It will increase to £60,000 for those who have been resident for 12 out of the last 14 years.
Capital Gains Tax
The annual exemption will increase by £100 to £11,100, the lowest increase for many years, but in line with the rate of inflation.
Entrepreneurs’ relief will be restricted, with immediate effect, to the disposal of shares and business assets used in a trading company or business in which the taxpayer has a minimum 5% holding.
Non-resident individuals will pay tax at the same rate as UK residents on disposals of residential property in the UK, the acquisition value to be that at 6 April 2015 or the date of acquisition, if later.
The charge on enveloped dwellings – i.e. UK residential properties owned through foreign companies – will be extended to properties worth between £1 million and £2 million with effect from 6 April 2015 and to properties worth between £500,000 and £1 million with effect from 6 April 2016.
Charities providing palliative care will be eligible for VAT refunds, as will blood bikes, search and rescue organisations and air ambulances.
Legislation will be introduced to enable pensioners who have already been compelled to take out annuities to convert those annuities back to a capital sum.
The lifetime allowance for pension savings will be reduced from £1.25 million to £1 million with effect from 6 April 2016.
Any pension funds remaining at the death of the pensioner will be subject to tax at the pensioner’s marginal tax rate instead of the current 55%.
Inheritance Tax will be waived on the estates of emergency services personnel and humanitarian aid workers who die on active duty for all deaths after 19 March 2014.
The nil-rate band of tax, as previously announced, remains at £325,000.
The Government will carry out a review of the use of deeds of variation for tax purposes, with the report expected to be delivered in autumn 2015.
Tobacco duty will continue to rise at 2% above the RPI.
Tax on most beers will fall by an average of 1p per pint.
Duties on spirits and other drinks in excess of 22% alcohol, and on most cider, will be reduced by 2%.
The proposed fuel duty rise in September will be cancelled.
Support for Businesses
The main rate of Corporation Tax will remain at 21% with legislation being introduced to reduce the rate to 20% with effect from 1 April 2016.
Small businesses will no longer be required to complete an annual tax return, which will be replaced by online digital tax accounts. Further details will be announced.
Office holders of family companies, and their families, will be able to receive benefits in kind of individual value less than £50 and total value less than £300 free of tax with effect from 6 April 2015.
The rules for Disclosure of Tax Avoidance Schemes will be tightened up, with provision for Conduct Notices to be given to a greater range of promoters of tax avoidance schemes and for greater penalties for failure to comply with reporting requirements.
New penalties will be introduced to counter avoidance schemes that fall within the ambit of the General Anti-Abuse Rule.
Legislation will be introduced to impose reporting requirements and surcharges on individuals who are considered to be “serial avoiders” of tax, with further legislation at a future date to cover promoters of schemes that regularly fail.
The contents of this bulletin are for information purposes only and have been compiled from Government publications available on conclusion of the Chancellor’s Budget speech. They are not intended to be exhaustive and the Budget proposals are, in most cases, subject to parliamentary scrutiny. if you require further advice on this year’s Budget you should consult your accountant, solicitor, tax adviser or financial adviser.
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.