Budget Comment March 2015
Of course this Budget was only weeks before the General Election so there was never going to be anything radical and, credit to George, no giveaway tax bribes either. We are left wondering what the first Budget of the next Parliament will bring, when it will be and who will deliver it!
So nothing of note on any of the big personal taxes, just a few ISA reforms that may (or may not) happen in the Autumn and the expected Allowance changes.
We are now used to a spiders web of announcements (covering Budgets and Autumn Statements) – let’s have a look at some of the categories:
- This year’s Announcements applicable from 6 April 2015
- Last year’s Announcements applicable from 6 April 2015
- This year’s Announcements applicable from 6 April 2016
- Last year’s Announcements applicable from 6 April 2016
- This year’s Announcements applicable from 6 April 2019
- This year’s Announcements too vague to put a time on
This year’s Announcements applicable from 6 April 2015
As noted above – nothing of note!
Last year’s Announcements applicable from 6 April 2015
Pension Benefit Reform: It’s happened! You no longer need to take an Annuity from your Personal Pension! Of course you may need a good tax planner to help you finesse your income and Income Tax Bands! But this measure removes one of the main excuses for not investing in a Personal Pension. And if you are a higher rate taxpayer today expecting to be a basic rate payer in retirement: it’s time to invest!
Capital Gains Tax: Non-residents disposing of residential property in the UK are now subject to UK Capital Gains Tax. It will only apply to gains since 5 April 2015 so taxpayers will either need a valuation at 5 April 2015 or they can opt for a time apportionment of the gain (we’d think the latter will be unlikely). With no sudden impact this one is a slow burn for non-residents to look out for…
This year’s Announcements applicable from 6 April 2016
The Pension Lifetime Allowance: will fall to £1,000,000 (currently £1,250,000). This might sound like a lot of money but considering it was limitless not long ago, it is tiny by comparison. When you delve into the detail pensions are fiendishly complex – if you have a pension with a value approaching the Allowance please seek specialist pension advice. As an aside, the reduced Allowance means there is less pressure to limit the tax relief on contributions – a lever that has always been too complex to activate!
Last year’s Budget applicable from 6 April 2016
State Pension: Mentioned here in case you forget amid all the other pension chat! For those retiring after 5 April 2016 a new all encompassing ‘Flat Rate State Pension’ is being phased in. Eventually no more ‘Earnings Related’ or ‘Second Pension’ adjustments. A simple (inflation adjusted) £144 per week across the board – so long as you have 35 years of qualifying National Insurance (there is nothing for those with less than 10 years). There will be no differentiation between men and women and the age difference for men and women (remember until recently women took theirs at 60 and men 65) is well on its way to being phased out. By 2020 both sexes will reach State Pension age at 66 and by 2028 it is expected to be 67.
The winners here are the self-employed and the relatively low earners. The losers will be the high earning long term employees who were not ‘contracted out’.
Last year’s Announcements applicable from 6 April 2016
State Pension: For those retiring after 5 April 2016 a new all encompassing ‘Flat Rate State Pension’ is being phased in. Eventually no more ‘Earnings Related’ or ‘Second Pension’ adjustments. A simple (inflation adjusted) £144 per week across the board – so long as you have 35 years of qualifying National Insurance (there is nothing for those with less than 10 years).
This year’s Announcements applicable from 6 April 2019
Something about Car Benefit increases – mentioned here only to query why make such a minor announcement so far in advance – absurd!
This year’s Announcements too vague to put a time on
Digital Tax Accounts: Abolition of Tax Returns… mmm sounds too good to be true. We have always applauded the HMRC and the way they have embraced the electronic world (it’s true) and this initiative will no doubt be very useful for certain taxpayers. However, I’m sorry, we don’t think this will signal the end of the Personal Tax Accountant especially for the vast majority (if not all) of our tax clients!
Class 2 National Insurance: This is one for the self-employed. Good news – it’s being abolished soon! Bad news it’s only £2.75 per week and it will be balanced (we think) by an increase in Class 4 National Insurance. Nonetheless a welcome simplification (for once!).
And a topical one for anyone running a payroll: Auto-Enrolment
Auto-Enrolment is the shorthand expression for the obligatory ‘Workplace Pensions’ that all employers will have to have in place by their ‘Staging Date’ (unless they are able to formally opt out). We and, in many cases, the Pensions Regulator have already been in touch with our payroll clients…
And what about Non-Doms?
The increase in the Remittance Basis ‘membership fee’ to £90,000 (applicable from 6 April 2015 for certain Non-Doms) means Non-Dom status will be largely irrelevant for all but the super wealthy (to make it worth paying and assuming a 2% return in a tax free offshore environment would mean having offshore income earning assets worth significantly more than £10,000,000).
The comments above are brief highlights and each item is subject to change, please note the full chart of Rates and Allowances below and remember – there is always more to it than meets the eye so please contact us before taking or refraining from action.
Rates and Allowances for 2015 and 2016
The chart of new Rates and Allowances is, as always, set out below. Probably the biggest change is the increase in Tax Free income (the Personal Allowance) from £9,440 to £10,000 in 2014-15. Did you think it was £10,500? Understandable if you did but that is next year’s Allowance (2015-16). The good thing for higher rate taxpayers is that the 40% threshold hasn’t been reduced (as it has been recently) in fact it has increased from £41,450 to £41,865. So a real benefit here for higher rate taxpayers. There’s a summary of Tax Rates below reflecting these changes.
2014-15 (£) |
2015-16 (£) |
Increase (£) |
|
| Income tax allowances | |||
| Personal
allowance Personal allowance for people aged 65-74 Personal allowance for people 75 and over |
10,000 10,500 10,660 |
10,600 10,600 10,660 |
600 100 0 |
| Income
limit for under 65 personal allowance Income limit for age-related allowances |
100,000 27,000 |
100,000 27,700 |
0 |
| Married
couple’s allowance for people born before 6 April
1935 Minimum amount of married couple’s allowance Blind person's allowance |
8,165 3,140 2,160 |
8,355 3,220 2,290 |
190 80 60 |
| Capital
gains tax annual exempt amount: Individuals etc Trustees Main rate 28%, Lower Rate 18% |
11,000 5,500 |
11,100 5,550 |
100 50 |
| Inheritance
tax threshold Main Rate 40% |
325,000 |
325,000 |
0 |
Taxable
bands 2014-15 (£) |
Taxable
bands 2015-16 (£) |
||
| Starting rate 10% | – |
Starting rate 10% | – |
| Basic rate 20% | 0
– 31,865 |
Basic rate 20% | 0
– 31,785 |
| Higher rate 40% | 31,866
- 150,000 |
Higher rate 40% | 31,786
- 150,000 |
| Additional rate 50% | Over
150,000 |
Additional rate 45% | Over
150,000 |
| Corporation tax profits 2015-16 (£) | |
| Small companies’ rate 20% | 0
– 300,000 |
| Marginal relief | 300,001
– 1,500,000 |
| Main rate 23% | 1,500,001
or more |
National Insurance
2014/2015 |
2015/2016 |
|||
| Class 1 Employees | ||||
| On first | £153 pw | Nil | £155 pw | Nil |
| Between | £153 - £805 pw | 12% | £153 - £815 pw | 12% |
| Over | £805 pw | 2% | £815 pw | 2% |
| Employee's contracted-out rate | 1.4% | 1.4% | ||
| Class 1 Employers | ||||
| On first | £153 pw | Nil | £155 pw | Nil |
| Over | £153 pw | 13.8% | £155 pw | 13.8% |
| Employers' contracted-out rebate, salary related schemes | 3.4% | 3.4% | ||
| Employers' contracted-out rebate, money purchase schemes | Abolished | Abolished | ||
| Class 2 Self employed | ||||
| Flat rate | £2.75 pw | £2.80 pw | ||
| Small earnings exception | £5,885 pa | £5,965 pa | ||
| Special Class 2 rate for share fishermen | £3.40 pw | £3.45 pw | ||
| Special Class 2 rate for volunteer development workers | £5.55 pw | £5.60 pw | ||
| Class 3 Voluntary | ||||
| Flat rate | £13.90 pw | £14.10 pw | ||
| Class 4 Self employed | ||||
| On profits between | £7,956
- £41,865 pa |
9% | £8,060
- £42,385 pa |
9% |
| above £41,865 | 2% | above £42,385 | 2% | |
Stamp Taxes
Transfers of property (consideration paid)
| Rate | All
land in the UK |
| Residential | |
| Zero | £0 – £125,000 |
| 2% | On the next £125,000 |
| 5% | On the next £675,000 |
| 10% | On the next £575,000 |
| 12% | On the rest (above) £1,500,000 |
| Rate | All
land in the UK |
| Non Residential | |
| Zero | £0 – £150,000 |
| 1% | £150,001 – £250,000 |
| 2% | £250,001 – £500,000 |
| 4% | £500,001 upwards |
Value Added Tax (VAT)
| April 2014-15 | April 2015-16 | |
| Standard rate | 20% | 20% |
| Reduced rate | 5% | 5% |
| Zero rate | 0% | 0% |
| Exempt | n/a | n/a |
Value Added Tax (VAT) – Registration and Deregistration thresholds
| From April 2014 | From April 2015 | |
| VAT - registration threshold | 81,000 | 82,000 |
| VAT - deregistration threshold | 79,000 | 80,000 |