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CH Accountancy

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Summer Budget 2015

 

Today saw George Osborne’s 7th Budget, the first for a majority Tory government since November 1996.

Whilst we were aware of some of the announcements it’s fair to say Small Limited Companies have not fared too well, with the single director & shareholder companies facing an increase in their tax bills.

Here is a summary of the main points from today’s budget.

Employment Allowance

The Employment Allowance is being increased by 50% to £3000 in April 2016. However for companies where the director is the sole employee this allowance has been withdrawn.

Amendments to Dividends

With effect from April 2016 the 10% dividend tax credit will be replaced by a £5,000 dividend income allowance. Any dividend income over that level will be subject to income tax at the following rates:

  • 7.5% for basic rate taxpayers
  • 32.5% for higher rate taxpayers
  • 38.1% for additional rate taxpayers.

Corporation Tax Rate

The rate of corporation tax is to be cut to 19% in 2017 and then to 18% in 2020.

Areas to be reviewed

The following areas will be reviewed, so expect to hear announcements regarding these in the future.

  • Tax treatment of travel and subsistence expenses
  • Closet alignment of income tax and National Insurance
  • Abolishing of Class 2 NI & reform Class 4 for the self-employed
  • Taxation of small companies
  • Improvement of IR35
  • Digital reporting to replace the tax return

National Wage

The National Wage for those over 25 is to increase to £7.20 per hour from April 2016 and to £9.00 by April 2020.

Personal Allowance & Tax Brackets

The Personal Allowance is to increase to £11,000 from April 2016. This is set to rise to £12,500 by 2020, meaning those working 30 hours per week on minimum wage will not pay income tax. The higher rate bracket is to increase to £43,000.

Pension Contributions

The limit on tax relief for pensions contributions will reduce from £40k to £10k.

Inheritance Tax

The Inheritance Tax threshold will increase from £325,000 to £1 million from April 2017, with a new £325,000 family home allowance.

Childcare

As mentioned in my latest newsletter funding for 3-4 year olds will increase from 15 hours a week in term time to 30 hours. This will start in some parts of England from September 2016 and the rest of the country from April 2017.

Landlords Mortgage Interest Claims

Relief on mortgage interest is to be restricted to basic rate of income tax.

Rent a Room

The rent a room relief scheme is to rise to £7,500.

Insurance Premium Tax (IPT)

From the 1st November 2015 IPT will increase from 6% to 9.5%, so you will notice an increase on your insurance policies (including your home and car insurance) on renewals after this date.

Welfare

Tax credits and Universal Credit will be restricted to 2 children. This will affect those born after April 2017.

The income limit for tax credits will be reduced to £3,850 – currently £6,240.

Disability benefits will not be taxed or means-tested.

18 – 21 year olds will not automatically be entitled to claim housing benefit, a new ‘earn to learn’ obligation is being brought in.

Alcohol, tobacco, & fuel

No rise in fuel duty. Alcohol and tobacco duties were not mentioned.

Trading Laws

A consultation will take place on changing Sunday trading laws.

If you have any questions about how today’s budget will affect you please do not hesitate to contact me. With the UK tax system becoming more and more complicated get in touch to see how I can take the stress out of your accounts.

More details can be found here on the BBC website, and the full report can be found here on the HMRC website.

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