2015 Budget: How will the man on the street be affected?
As the more eagle eyed of you will no doubt have noticed, Chancellor George Osborne presented his 2015 Budget to Parliament this week.
The 2015 Budget will affect both this coming tax year and the following – and if you live in the UK it is likely to have a profound impact on your life.
You’ve probably heard plenty about it already but we thought it was about time we waded into the debate so our views below are in purple. Enjoy!
- The tax-free personal allowance will increase from £10,600 (2015/16) to £10,800 (2016/17) and £11,000 (2017/18).
- In line with the personal allowance, there will be an increase from £42,385 (2015/16) to £43,300 (2017/18) in the threshold at which people start paying 40p income tax.
As the threshold is above inflation, this news is a welcome relief to middle earners. However from 2010/2011 this limit was under the value of inflation, therefore it would have needed to rise further for us to be better off than we were in 2009/10.
- Tax allowance available to transfer for married couples will rise to £1,060 (2015/16).
This is not a game changer but it will be a welcome help for stay-at-home parents, for example. If you need more details read our blog on Marriage Allowance.
- A new online system for tax returns has been introduced. This allows people to manage their taxes at any time. The main purpose for this action is to abolish the annual paper tax return. In the meantime, paper tax returns remain available for people without the technology or skills to access a digital platform.
A good suggestion and helpful that there is still an element of choice. However, we feel the choice must remain.
- Review of inheritance tax “avoidance” through the use of deeds of variation.
We completely disagree that this is even tax avoidance in the first place! For more details have a look on our blog regarding Ed Miliband and the semantics of tax language.
- Class 2 National Insurance will be abolished in the next Parliament.
Good news for the self-employed as, in our opinion, this tax made precious little sense in the first place.
- The rate of corporation tax will decrease from 21% to 20% for companies with profit of over £300,000.
That’s great for bigger firms but it would be nice to see a decrease in corporation tax rate for small companies as well – the backbone of the UK economy.
Company car tax:
- The tax levied on company cars will increase by 3% in 2019/2020.
Wow, an incredible rise. We already pay more taxes on company cars than we do in inheritance tax! The stealthiest of stealth taxes. Amazing this has had little coverage.
New personal savings allowance:
- First £1,000 for basic rate taxpayers.
- Up to £500 for higher rate taxpayers.
Similar to what used to be the 10% basic rate band limit, but the Government are being a little more generous this time. This is a welcome incentive for savers.
- ISA annual savings limit increased to £15,240.
- ISAs will become ‘fully flexible’, allowing savers to withdraw money without losing their tax-free entitlement.
Both statements are sensible moves.
The new “Help to buy ISA” will allow the Government to top up every £200 saved for a deposit by £50.
This is a pretty generous incentive to help people get on the property ladder, something that has become increasingly difficult for young people in this day and age. Bravo George!
- From next year the pension pot lifetime allowance will be reduced from £1.25m to £1m, saving £600m annually for the state.
- The law will be changed, allowing pensioners to access their “pot” without restrictions (from pensionable age).
- The 55% tax for accessing annuities (i.e. your “pot”) will be abolished and tax will be applied at the marginal rates.
- It will be possible to sell annuities for cash.
This will give more freedoms for pensioners but it goes without saying there are risks associated so use that freedom wisely!
OK well that’s more than enough from us but we hope this helps lift the lid on a few issues in the 2015 Budget – as always give us a call if you need to discuss any of this and we’d be only too happy to help.