Budget 2015

Budget 2015   – summary of tax changes

1. It was confirmed that the income tax free allowance would be increased to £10,600 for 2015/16 and furthermore the allowance would be increased to £10,800 in 2015-16 and £11,000 in 2016-17. The threshold at which people pay higher rate tax band is to be raised by above the inflation rate from £42,385 to £43,000. In addition the transferable tax allowance for married couples shall rise to £1,100.
2. There will be an introduction of a savings personal allowance of £1,000 (£500 for higher rate tax payers) on interest received on savings. This will take 95% of Britons out of savings tax altogether.
3. To help first time buyers save for a deposit, the Government is introducing a Help to Buy ISA. People will be able to open an ISA, save up to £200 a month towards their first home, and the government will boost it by 25% so in effect a £50 bonus for every £200 people save, up to £3000.
4. ISAs are being reformed so that instead of being able to put up to £15,240 in the 2015-16 tax year into an ISA in total, people can take out their money and put it back in within the same year, without losing their ISA tax benefits – as long as the repayment is made in the same financial year as the withdrawal.
5. There is to be a review of on the use of deeds of variation to avoid inheritance tax with a report due by the autumn.
6. The annual tax return is to be abolished within the next five years replacing it with a single ‘digital’ tax account. As of next year, HMRC will automatically collate the tax affairs of millions of UK taxpayers from employers, banks and investment firms into a single digital tax account which can be checked at any time online. The accounts will allow tax to be paid at any time and will also simplify the payment of various levies for businesses. Those with straightforward tax affairs will have no need to collect receipts and other documents. Only those who do not want to manage their affairs online will still have to complete a self-assessment return.
7. Class 2 National Insurance contributions for the self-employed is to be abolished entirely in the next Parliament
8. With regard to pensions
9. There was confirmation of the abolition of 55% tax on pensions handed down to family members which will come into force on 6th April 2015. The new rules mean that if a person who dies is 75 or over, the person who receives the pension pot will only pay their marginal income tax rate as they draw money from the pension. If someone aged under 75 dies, the person who receives the pot is able to take money from the pension without paying any tax.
10. From April 2016 for those who already have an annuity in place they will be allowed to trade it in for a lump sum without a tax penalty. Currently, people who have bought an annuity are unable to sell it without having to pay at least 55% tax on it. From April 2016, the tax rules will change so that people who already have income from an annuity can sell that when they choose and will pay their marginal rate of tax they pay on income, instead of 55%.There is to be a consultation with the Financial Conduct Authority as to whether annuity holders will be required to receive regulated financial advice to consider all their options.
11. The lifetime allowance of tax-free pension savings is being reduced from £1.25m to £1m in April 2016. This is the amount you can put into a pension that qualifies for tax relief. The annual allowance remains unchanged at £40,000.
12. The fuel duty increase scheduled for September is cancelled.
13. There was confirmation that corporation tax is to be reduced to 20% with effect from 6th April 2015.