Summary of the Budget 2015
The 2015 Budget was pretty much as expected, and promised, in that there was not any ground breaking news that was going to sway voter’s votes one way or another in advance of the General Election. A few key changes though will affect tax planning and personal finance planning for UK taxpayers. Figurit clients will have received our full Budget Summary Report but we have summarised the main points in this article.
The key points for personal tax planning
Pension savers in the UK, especially those who make significant contributions each year, could be affected by the proposed changes to the lifetime allowance.
The lifetime allowance (LTA) is the amount of that can be drawn, without tax implications, from a pension fund upon retirement.
The LTA, which is set by the government, currently stands at £1.25 million but it has been reducing for a while now, as it was previously £1.5 million.
From April 2016, the LTA will be cut further to £1 million but the Government has promised (should they remain in power) that this will then be fixed until 2018 after which it will fluctuate with the Consumer Price Index (CPI).
If you have pension funds already in excess of £1 million there will be protection schemes available to ensure your contributions are not lost.
The annual pension contribution allowance remains at £40,000.
Savings & ISA’s
Those with a Cash ISA will be able to invest and withdraw contributions as much as they like within a tax year and their subscription limit remains unaffected. There has been no mention of a similar arrangement for Stocks & Shares ISA’s at this stage. Regarding ISA’s, there is also expected to be an extension to the “qualifying investment list”.
In addition, from April 2016 the Government propose introducing a tax-free “personal savings allowance” where an element of savings income can be earned with zero tax charged. The allowance will be set initially at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.
These changes have been proposed to encourage the country to start saving again as the economy stabilises.
Tax and National Insurance
- Personal allowance – 2016/17 – £10,800
- Personal allowance – 2017/18 – £11,000
- Capital Gains Tax – 2015/17 – £11,100
- Class 2 National Insurance is to be abolished
The key points for business tax planning
Reduction of the Annual Investment Allowance (AIA)
The AIA is a temporary initiative that dictates the level of investment into capital equipment, plant and machinery and fixtures and fittings that are eligible for 100% tax relief.
AIA stands at a very generous £500,000, increased now for a number of years from its usual circa £25,000 to encourage business growth and development.
This arrangement comes to an end, officially, in December 2015, however a revised figure will be announced in the Autumn Statement 2015.
It has been suggested in the Budget that the AIA will not be reducing as low as it’s previous level. However, there is no indication as yet so if you are planning on purchasing new capital equipment, carefully consider the timing so as not to miss out on valuable tax relief.
The “death” of the tax return
This news is unlikely to benefit any commercial business owners, at least in the short term, except the very smallest of the small businesses or individuals who simply have salary, savings income and dividends (not including from their own limited company).
It’s therefore pretty much business as usual for anyone with property income, self employed income, dividend income or those with a successful commercial business.
There is a debate opening though. HMRC plan to move away from the current tax filing system by 2020 allowing technology to take over a great deal of the compliance side of accounting and tax filing.
Figurit have already been pre-empting this for several years by ensuring our clients are equipped with excellent, intuitive software and making the service we offer a lot more than just compliance.
Figurit are offering a FREE Budget Summary to all clients. If you are not yet a client of ours and have a London based commercial business, please contact Katie who can send you a copy and perhaps also arrange a meeting for you with one of our specialist commercial team.
020 7376 9333