This is the first Conservative budget in 19 years and George Osborne has taken the opportunity to include some politically inspired changes.
Most income taxpayers will benefit but only by a bit. Wealthy home-owners, and their children, are some of the winners. Companies will enjoy reduced corporation tax rates. Some employers will get a reduction in employment costs.
The losers include landowners claiming mortgage interest relief, high earners making large pension contributions, and anyone reliant upon benefits and tax credits.
Personal allowance increase
The income tax personal allowance will increase from £10,600 in 2015-16 to £11,000 in 2016-17.
It will increase to £11,200 from 2017-18.
Higher rate threshold increase
The higher rate threshold will increase from £42,385 in 2015-16 to £43,000 in 2016-17 and to £43,600 in 2017-18. The NICs Upper Earnings Limit will also increase to remain aligned with the higher rate threshold.
Dividend taxation
The Dividend Tax Credit will be abolished 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.
If you are a Landlord with investment properties you should note:
Reform of the Wear and Tear Allowance
From April 2016, the Wear and Tear Allowance will be replaced with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings. Capital allowances will continue to apply for landlords of furnished holiday lets. Further details will be available soon.
Restricting finance cost relief for landlords
There will be a restriction on the relief on finance costs that individual landlords of residential property can get to the basic rate of tax. The restriction will be phased in over 4 years, starting from April 2017.
If you are an employer you should note:
Increasing the employer National Insurance contributions Employment Allowance by £1,000
The annual Employment Allowance will be increased from £2,000 to £3,000. This will come into effect from April 2016.
Clients with potential Inheritance Tax liabilities should note:-
Inheritance tax and the main residence nil-rate band
An additional nil-rate band will be introduced when a residence is passed on death to direct descendants. This will be £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20, and £175,000 in 2020-21. It will then increase in line with CPI from 2021-22 onwards. Any unused nil-rate band will be transferred to a surviving spouse or civil partner. It will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants. This element will be the subject of a technical consultation. There will also be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.
Inheritance tax and the nil-rate band
The inheritance tax nil-rate band is currently frozen at £325,000 until April 2018. The nil-rate band will continue to be frozen at £325,000 until April 2021.
Corporate clients will be pleased to hear the following:-
Corporation tax rates – The government will reduce the corporation tax rate from 20% to 19% in 2017 and 18% in 2020.
Business owners should be aware of:-
Capital allowances: Annual Investment Allowance (AIA) – The permanent level of the AIA will increase from £25,000 to £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.
For any further information on the above, please contact nigel.atkinson@hghyork.co.uk or robert.salenius@hghyork.co.uk or call 01904 655202.
