In presenting his final budget of this Parliament George Osborne was predictably wide ranging in scope and focused on preparing for a certain event on the 7th May with a number of well-aimed asides at the Leader of the Opposition and the Shadow Chancellor.
Towards the end of 2014 the government issued many proposed clauses of Finance Bill 2015 together with updates on consultations. Due to the dissolution of Parliament on 30 March some measures will be legislated for in the week commencing 23 March, whilst others will be enacted by a Finance Bill in the next Parliament (depending on the result of the General Election).
The Budget proposes further measures, some of which may only come to fruition if the Conservative Party is in power in the next Parliament.
Our summary focuses on the issues likely to affect you, your family and your business. If you have any questions please do not hesitate to contact us for advice.
Main Budget tax proposals
- Increased personal allowances
- The introduction of a new Personal Savings Allowance
- Changes to ISAs including the introduction of a new type of ISA for First Time Buyers
- Changes to pensions
- Potential business rate reform in England
- Entrepreneur’s Relief – changes to qualifying conditions
The personal allowance for 2015/16
For those born after 5 April 1938 the personal allowance will be increased to £10,600. For
those born before 6 April 1938 the personal allowance remains at £10,660.
Personal Savings Allowance
The Chancellor announced that legislation will be introduced in a future Finance Bill to apply a
Personal Savings Allowance to income such as bank and building society interest from 6 April
- The Personal Savings Allowance will apply for up to £1,000 of a basic rate taxpayer’s savings income, and up to £500 of a higher rate taxpayer’s savings income each year.
The Personal Savings Allowance will not be available for additional rate taxpayers.
These changes will have effect from 6 April 2016 and the Personal Savings Allowance will
be in addition to the tax advantages currently available to savers from Individual Savings
Accounts. The Personal Savings Allowance will provide basic and higher rate tax payers with a tax
saving of up to £200 each year.
Help to Buy ISA
The government has announced the introduction of a new type of ISA, the Help to
Buy ISA, which will provide a tax free savings account for first time buyers wishing to save for
a home. The scheme will provide a government bonus to each person who has saved into a Help to
Buy ISA at the point they use their savings to purchase their first home. For every £200 a first
time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000
on £12,000 of savings.
Help to Buy ISAs will be subject to eligibility rules and limits!
Pensions – changes to access to pension funds
The Taxation of Pensions Act has recently been enacted. It provides that individuals aged 55 or
over can access their money purchase pension savings as they choose from 6 April 2015.
In most cases access to the fund will be achieved in one of two ways:
• Allocation of a pension fund (or part of a pension fund) to a ‘flexi-access drawdown
account’ from which any amount can be taken over whatever period the person
• Taking a single or series of lump sums from a pension fund (known as an ‘uncrystallised
funds pension lump sum’).
When an allocation of funds to a flexi-access account is made the member typically will take
the opportunity of taking a tax free lump sum from the fund (as under current rules).
The person will then decide how much or how little to take from the flexi-access account. Any
amounts that are taken will count as taxable income in the year of receipt. Access to some or all of a
pension fund without first allocating to a flexi-access account can be achieved by taking an
uncrystallised funds pension lump sum.
The tax effect will be:
- • 25% is tax free
- • the remainder is taxable as income.
An annuity can, of course, be purchased with some or all of the fund as currently.
This is a particularly complicated area with taxation and investment consequences and great care should therefore be taken in making any decision.
Tax Avoidance Measure
In terms of anti-avoidance measures the main focus was on larger corporate businesses (the diverted profits or ‘google tax’) though here are a selection of some of the other specific targets:
- Internally transferred Goodwill
- Planning which ‘abused’ the late paid interest rules
- Bank loss relief restrictions
- Goodwill transactions between related companies
- Entrepreneur’s relief restrictions for associated disposals
- Arrangements which HMRC consider are contrived which seek to maximise b/fwd losses or reliefs
- Miscellaneous loss relief planning
- Employment intermediaries exploiting the travel and subsistence expense regime
The changes to Entrepreneur’s Relief add further significance to ensuring that great care is taken where clients are looking to take advantage of this very valuable relief.
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