Budget report July 2015 – key announcements
Delivering the first Conservative only Budget in nearly 20 years, Chancellor George Osborne announced a series of bold measures affecting business, tax and welfare in his second Budget for 2015.
Key announcements included:
- Personal Allowance for Income Tax – the personal allowance will be increased to £11,000 for the 2016/17 tax year.
- Higher Rate Income Tax Threshold – the amount an individual will have to earn before paying tax at 40% will be increased to £43,000 in 2016/17.
- Corporation Tax Rate – the corporation tax rate will be reduced to 19% in 2017 and 18% in 2020. In addition, groups of companies with annual profits exceeding £20 million will be required to pay their corporation tax earlier from April 2017.
- National Insurance Employment Allowance – the employment allowance will increase to £3,000 from April 2016, however, companies where the director is the sole employee will no longer be able to claim.
- Dividend Tax Credit – the normal 10% credit will be removed from April 2016, and replaced with a tax-free dividend allowance of £5,000. The dividend tax rates will be increased to 7.5% for basic rate income tax payers, 32.5% for higher rate tax payers and 38.1% for additional rate tax payers.
- Non-Domiciled Status – the permanent non-domiciled status will be abolished from April 2017. After this date, any individual who has been resident in the UK for 15 of the last 20 tax years will be considered UK-domiciled for tax purposes.
- Tax-Free Pension Annual Allowance – from April 2016 the pension annual allowance for those earning over £150,000 will be tapered down to £10,000 from the current £40,000.
- Annual Investment Allowance – the annual investment allowance will be set at £200,000 permanently from January 2016.
- Inheritance Tax – a family home allowance will be phased in from 2017/18 and added to the existing £325,000 inheritance tax threshold. The total tax free allowance for a surviving spouse or civil partner could be up to £1 million by 2020/21. This allowance will be gradually withdrawn for estates worth more than £2 million.
- Property Tax – tax relief for property expenditure is to be restricted to 20% for all landlords by April 2020. In addition, the current wear and tear allowance will be replaced from April 2016.
- National Living Wage – a new national living wage of £7.20 an hour for over 25s will be introduced from April 2016. This will rise to over £9 an hour by 2020