Modernisation, much self-praise (depicted by one tabloid showing the Chancellor in a pair of ‘hot pants’), and the benefits of being ‘one United Kingdom’ were the messages repeated throughout the Chancellor’s 2015 Budget speech on Wednesday 18 March.
Looking to the future, a new £1 coin showing images of the four nations is to be released and annual tax returns are to become a thing of the past. However, the nation’s view on the question of ‘Hot or Not?’ will be decided at The General Election in May.
Below are a few of the main points from the Budget. More information will be available shortly on our website, www.msactax.co.uk.
Goodbye to the Annual Tax Return
The abolition of the annual tax return is part of the ‘vision’ to modernise the tax system. Digital tax accounts will hold information already provided to HMRC from third parties (e.g. employment income and bank interest). Taxpayers will then log-in and confirm that the information is correct. Further details are to be released later this year.
It is hoped that this could lead to lower annual tax compliance costs for many and it should be a simple transition for our business clients who use cloud based accounting software.
Capital Gains Tax
With the announcement of further restrictions to the Entrepreneurial Relief (ER) rules, business owners will most likely now pay capital gains tax at the rate of 28% (instead of the 10% rate available using ER) on the disposal of personal assets used in a company or a partnership – that is unless at least 5% equity in the company or in the partnership is sold at the same time.
Also, ER is no longer available on disposal of shares in a company that does not have a trade (or a ‘relevant’ trade). This will affect companies set up to invest in other companies or partnerships.
Budget 2014 announced the introduction of flexibility on pension drawdown from April 2015 and now, from 6 April 2016, people already receiving income from an annuity will be able to sell the annuity and pay tax only at their marginal rate of tax instead of at the current rate of 55%.
The bad news for those still saving towards their pension is that the lifetime allowance for pensions tax relief will be reduced from £1.25m to £1m from April 2016.
Tax Free Savings
The introduction of a Personal Savings Allowance will mean that from 6 April 2016, the first £1,000 of interest will be tax free for basic rate tax payers, saving up to £200 per annum. For higher rate taxpayers, the allowance reduces to £500. There will be no allowance for additional rate taxpayers (i.e. those paying income tax at the rate of 45%).
On the ISA front, in addition to the increased ISA limits announced in the Autumn Statement, from 6 April it will be possible to withdraw and redeposit ISA funds within the same tax year without impacting on the overall annual limits.
Also, more help for first time home buyers saving for a deposit with the introduction of a Help to Buy ISA from autumn 2015. Savings will be boosted by 25% up to a maximum of £3,000. The bonus is per person so those buying together can both receive a bonus.
Details of increases from October in the National Minimum Wage were announced prior to the Budget speech. The salary increase for a full time apprentice will be over £1,000, whilst a full time working adult will see a salary increase by just over £350.
Also, as announced in the Autumn Statement, from April 2015 trivial benefits of less than £50 will be exempt from tax and national insurance.
National Insurance Contributions (NICs)
News for the self employed is that Class 2 NICs will be abolished from April 2016. Restructuring of Class 4 NICs (also payable by the self employed) will take place with the introduction of a new contributory benefit test. More details on this will be announced later this year and we wait with interest to see the details of this new test.
Tax Avoidance and Evasion Measures
HMRC continue their crusade against tax evasion and avoiders by introducing tougher sanctions for the taxpayers, facilitators and promotors of ‘schemes’.
The Liechtenstein and the Crown Dependencies Disclosure Facilities will close at the end of 2015, which is earlier than expected. These will be replaced by ‘last chance’ disclosure facility between 2016 and mid 2017 with tougher penalties of at least 30% and, in some cases, no immunity from criminal prosecutions.
And Finally ….. The good news is that the fuel duty increase which had been scheduled for later this year has been abandoned, the duty on beer, spirits and cider has been reduced and the duty on wine has been frozen.
Please contact Stewart McKinnon, Catherine Sinclair or your usual contact at M&S if you would like further information on any of the above points.