2015 July Budget
Summer Budget Highlights – July 2015
Thursday 9 July, 2015
Personal Tax Allowances
The personal allowance will increase to £11,000 from April 6th 2016, and to £11,200 from 6th April 2017. From April 6th 2016 & 2017 the higher tax rate will apply to taxable incomes over £43,000 and £43,600 respectively.
Inheritance Tax Threshold
The Government has introduced a family home allowance of £100,000 from 2017/18 increasing to £175,000 in 2020/21. This will be added to the £325,000 individual threshold and will rise to £500,000 if a family home is being passed on. If these assets are being passed on to a surviving spouse or civil partner no inheritance tax will apply, and any ‘unused’ inheritance tax threshold on the first death can be passed on to the surviving spouse/partner. The Government is enabling any properties worth up to £1million (from 2020/21) to be passed on without inheritance tax being paid on the property. The additional relief, will be tapered away for estates valued at between £2million and £2.35million.
Pension Changes
Tapered Annual Allowance
From 6 April 2016 individuals earning more than £150,000 will have their tax-free pension contributions allowance tapered from the current £40,000 per year to a minimum of £10,000. There will be a tapered annual allowance for those with "adjusted" income (this will include the value of any pension contributions/accrual over £150k). Individuals with "threshold income" below £110k will not be subject to the taper, but any salary sacrifice made on or after 9 July 2015 to an employer pension contribution will be added back in when calculating threshold income. For more information visit https://www.gov.uk/government/publications/pensions-tapered-annual-allowance
Lump Sum Benefits
The 45% tax charge on lump sum benefits (paid on death after 75 years old or paid more than two years after a pre-75 death) will be abolished after April 6th 2016 and the individual will now be taxed at their marginal rate. For more information visit: https://www.gov.uk/government/publications/taxation-of-lump-sum-death-benefits
Other Changes
The Government will issue a consultation paper on the secondary annuity market in Autumn 2015.
The Government announced the alignment of the pension input periods (PIP’s) with tax years to improve the implementation of the annual allowance taper. This will be introduced immediately.
For more information visit: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442951/Transitional_provisions_for_aligning_pension_input_periods.pdf
The Government is also planning to consult on the possibility of making pension transfers quicker and easier, and the opportunity to introduce a new ISA style pension where savers pay tax on income they put in, but not when they take it out.
Dividend Tax
A new £5,000 tax free dividend allowance will be introduced for all taxpayers from April 2016, which replaces the dividend tax credit.
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