Summer Budget Highlights from Warrener Stewart
09 July 2015 •
George Osborne proclaimed his Summer 2015 budget as ‘a Budget for the working people of Britain’.
During the Chancellor’s unusually long speech he introduced wide-ranging changes to both the taxation and welfare system.
To see how the new changes could affect you and your business we have prepared overview of some of the key points and have a short video discussion featuring two of our tax consultants; Ryan Lane and Francis Kershaw.
Personal Allowance & Higher Rate Threshold – From April 2016 the Personal Allowance will be £11,000, rising to £12,500 by the end of the current Parliament in 2020. Similarly, the threshold at which higher earners must pay 40% tax initially increases to £43,000 next year, increasing again to £50,000 by the end of the Parliament.
Overhaul of Dividend Taxation – Currently basic rate tax payers do not pay tax on their dividends. From 2016 basic rate taxpayers who hold shares in a company will have to pay 7.5% tax on their dividends. For higher and additional rate taxpayers, they will be taxed on their dividends at 32.5% and 38.1% respectively. Everyone will however benefit from a tax free allowance for dividends of £5,000, and shares held within pension funds and ISAs will continue to receive dividends tax free.
Non-domiciled Individuals - Radical changes were announced to the tax rules which apply to ‘non-doms’, which will come into effect from 2017 onwards. In particular, individuals who have been resident in the UK for 15 out of the last 20 years will be unable to claim the remittance basis, and consequently will be taxed on their worldwide income and gains. ‘Non-doms’ with UK residential property in overseas structures will no longer avoid a UK IHT charge, and finally individuals born in the UK to UK parents will no longer be able to claim non-domicile status if they leave the UK but then subsequently return to take up residency.
Inheritance Tax - From 2017, an additional £175,000 allowance will be introduced where the family home is passed to children or grandchildren on death. This means that a couple will be able to pass up to £1m to the next generation without an IHT charge. However, the additional allowance is tapered away above £2m, such that the largest estates get no benefit from the new allowance.
Buy to Let Investors - Interest relief on rental property will be restricted to the basic rate of tax. The restriction will be phased in over four years, starting from April 2017. Additionally, from next year owners of furnished property will no longer be able to claim a 10% ‘wear & tear’ allowance: instead, a deduction will only be given for actually expenditure incurred.
Employment Allowance - From April 2016 the employment allowance will not be available where the director is the only employee in the company. For other businesses, the employment allowance will be increased to £3,000.
Corporation Tax - Corporation tax will be reduced to 19% in 2017 and further reduced to 18% in 2020.
National Living Wage - From April 2016, a new National Living Wage of £7.20 an hour for the over 25s will be introduced. This will rise to over £9 an hour by 2020.
If you would like to explore what this Budget Statement could mean for you and your business please call 020 7731 6163 to talk to one of our tax team, you can also download our updated 2015 / 2016 tax card.