As predicted the Chancellor’s Emergency Budget statement delivered today made for uncomfortable viewing as he attempts to pay for electoral promises and keep Britain on the steady road to economic recovery with some belt tightening for all involved.
Below is a snapshot of the key announcements made earlier today.
We will be releasing our usual Budget Report tomorrow morning which will provide a comprehensive run down of the changes announced.
The dividend tax credit will be abolished from 5 April 2016. There will be a £5,000 dividend allowance and above that basic rate taxpayers will pay 7.5% tax on dividends. The rate for 40% and 45% taxpayers will be 32.5% and 38.1% respectively which represents a significant uplift form current levels. This is designed to frustrate the advantages of incorporation.
From April 2017, there will be a four year phased reduction of interest relief to the basic rate for buy-to-let investors. Furthermore, the wear and tear allowance for furnished letting will be abolished from April 2016.
Tax relief on pension contributions is to be restricted from April 2016. This will apply to those with incomes including pension contributions which exceed £150,000. The contribution allowance will be tapered to a lower limit of £10,000.
From April 2017 over a four year period there will be an enhancement to the nil rate band of £175,000 by 2020/21, commencing at £100,000, when a main residence is passed to a direct descendant. This will be transferable to a surviving spouse. This enhancement however will be tapered away once the estate exceeds £2 million. The benefit will remain for those who downsize their homes as the relief will cover other assets if necessary.
Anti-avoidance legislation to frustrate the benefit of multiple trusts (ie trusts set up within a short time period of each other) is to be introduced.
Legislation will be introduced to set a ceiling on the main rates for income tax, the standard and reduced rates of VAT and national insurance rates to their 2015/16 levels. This will also apply to the upper earnings NI limit which cannot exceed the income tax higher rate threshold (currently £42,385).
Individuals who have been resident in the UK for 15 out of the previous 20 years will from 6 April 2017 be deemed domiciled in the UK for all purposes of tax. Furthermore, children will not be able to inherit their parents domicile for tax purposes.
Additional measures will be introduced to effectively tax all UK residential property where beneficial ownership is by a non-domiciliary.
There will be no minimum period to elect for a remittance basis charge.
The rate will reduce from 20% to 19% effective from 1 April 2017 and then to 18% from 1 April 2020.
The Annual Investment Allowance will be £200,000 from 1 January 2016.
For accounting periods beginning after 8 July 2015 there will be no tax deduction for the write off for acquisitions of purchased goodwill and certain customer related intangible assets where the acquisition take place after 8 July 2015.
Following this should you require any advice on what this Budget means for you and your business please feel free to contact any of the team here at NLP by clicking here.