2015 Budget

Key Announcements in 2015 Budget

UK Chancellor George Osborne announced the 2015 Budget on a positive note. Economic growth is forecast to increase from 2.4% to 2.55 in 2015 and inflation has been revised down to 0.2%. Public sector borrowing is reduced to £90.2 billion and unemployment is 5.3%.

The most significant changes announced in the 2015 Budget are as follows:

Income tax personal allowance

The income tax personal allowance will increase from £10,000 to £10,600 in 2015/16, and further increase to £11,000 by 2017.

The basic rate limit will reduce from £31,865 to £31,785 in 2015/16.

The higher rate threshold will increase from £41,865 to £42,385 in 2015/16.

National Insurance

The National Insurance Employment Allowance has been extended to tax year 2014/15 and provides businesses with a reduction in their employer class 1 NICs of up to £2,000 a year.

It is proposed that Class 2 NICs will be abolished from the next parliament and Class 4 NICs reformed to include a benefit test.

Corporation tax rates and bands

The main rate of corporation tax will be reduced to 20 per cent from April 2015. The small profits rate remains unchanged at 20 per cent.

Entrepreneurs relief on goodwill

From 4 December 2014, entrepreneurs relief will no longer be available in respect of gains on business goodwill where the goodwill has been disposed of to a limited company which is related to the vendor.

Annual Investment Allowance

The Annual Investment Allowance for Companies will continue at £500,000. However, this is proposed to decrease to £25,000 from 1 December 2015.

Research and development (R&D) tax credit

The rate of the small and medium (SME) scheme will increase from 225% to 230%.

Pensions

The standard lifetime allowance for pensions will be reduced from £1.25m to £1m from 6 April 2016.

Individual Savings Accounts (ISA’s)

ISA Allowance increased from £15,000 to £15,240.

It is proposed from Autumn 2015 that ISA savers will be able to withdraw and replace money from their cash ISA without it counting towards their annual ISA subscription limit for that year.

A help to buy ISA will be introduced to enable first time buyers to save for their first home. The government will contribute 25% of the total amount saved in an ISA up to £3,000.

Savings

The 10% starting rate for savings income has been removed from 2015/16.

A new Personal Savings Allowance was introduced for which the first £1,000 of interest on savings will tax free. The allowance is restricted to £500 for Higher rate taxpayers. It will not be available to additional rate taxpayers.

End of the Personal Tax Return

It is proposed that the personal tax return will be phased out by 2016 and replaced by a digital tax account. Taxpayers will no longer be required to submit their self assessment tax returns. Instead they will have access to their digital tax account where they can log on and check that their details are correct before paying their tax.

Trivial Benefits in Kind

From 2015/16 employees will be granted an exemption from declaring qualifying trivial Benefits in Kind costing £50 or less on their P11D. Directors of close companies will be subject to an annual cap of £300.

Travel & Subsistence restriction

From 6 April 2016, proposals are in place to restrict tax relief for travel and subsistence for workers engaged via an employment intermediary such as an umbrella company or a personal service company, and under the supervision, direction and control of the end user. This will have significant implications for Limited company contractors. We will provide updates as more information is released.