Morgans Summer Budget Briefing: July 2015
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George Osborne delivered his Summer Budget today and, whilst this might be his seventh Budget, it’s only his first as Chancellor of a Conservative Majority Government and the first Tory Budget in 18 years.
The Summer Budget was billed as a Budget that would set bold policies that would secure Britain’s future and whilst it was leaked that the Government would extend the period of time required to reduce the deficit and move into surplus, the detail of where the £12bn savings in the Welfare Budget was the focus of much media attention.
Traditionally, the first Budget of Conservative Governments have been tax raising rather than tax cutting budgets and Mr Osborne didn’t disappoint. The BBC’s Robert Peston had this to say on the Budget: “Let's be clear, the way they have paid for less austerity is to put taxes up. According to the OBR (Office for Budget Responsibility), there are £47.2bn of additional taxes being raised".
Whilst we look at the changes introduced in detail below, those that initially catch the eye are changes to dividend taxation, the rise in insurance premium tax and changes in vehicle excise duty. Added to that, the widely predicted reform of Tax Credits is very significant because it saves £4.5bn a year.
You can view the chancellor’s speech in full by clicking here and if you would like to get the detail of HMRC’s perspective, then this link will take you to their summary page.

Summer Budget Headlines 2015

Photo of George Osborne, Chancellor of the Exchequer holding out his Red Dispatch Box

For the Individual:
Held back until the end of the speech was the announcement of the introduction of a new compulsory National Living Wage which will be set at £7.20 per hour when it’s introduced in April 2016 rising to £9.00 per hour by 2020. It is estimated that this will give around 2.5 million people a rise of £5,000 on average over 5 years.
The Inheritance Tax threshold will increase to £1 million from April 2017. However, the allowance doesn’t come in all at the one time and it increases year on year and will only reach the £1 million level in the year 2020/21. You should be aware that this additional allowance will only be in respect of your own home and, whilst it is transferrable between partners and spouses, it is only available if the property is transferred to your direct descendents. The current nil rate allowance has been frozen at £325,000 until April 2021. Finally, if you have an estate worth over £2 million, the additional exemption will be tapered and reduced for each pound of your estate over £2 million.
The actual rate of Income Tax that’s paid has been locked so there’s no increase there but the Chancellor announced that the Personal Allowance (before which you don’t pay any tax) will be increased to £11,000 next year and the threshold at which you pay the higher rate tax of 40% has been increased to £43,000 and again that’s effective from next year.
Dividend Tax Credit is being replaced by a new tax free allowance of £5,000 and new rates of tax on dividend income above the allowance of 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
Insurance Premium Tax will increase to 9.5% from November.
Landlords who have a Buy to Let mortgage will have their tax relief on the mortgage interest they pay restricted to the basic rate of tax and for those who rent out a room in their home, the allowance will be increased from £4,250 to £7,500 from April 2016.
New rules have also been introduced for those claiming Non Domicile status with those born in the UK to parents and who are domiciled here no longer being eligible to claim that status while they are resident in the UK.
For Businesses:
The Chancellor announced a reduction in Corporation Tax for all Companies to 19% in 2016 and 18% in 2017.
The dates for payment of Corporation Tax on Companies with annual profits of more than £20 million will be accelerated and payable on a quarterly basis starting on or after 1 April 2017 and the government will bring forward legislation to deal with this in the near future.
Annual Investment Allowance for investment in plant and machinery will be increased to £200,000 from 1 January 2016.
A Bank Corporation Tax surcharge is to be introduced and the Bank levy is to be phased out – some see this as a carrot to HSBC to remain headquartered in London.
National Insurance employment allowance for small firms to be increased by 50% to £3,000 from 2016.
On Welfare:
Tax Credits and Universal Credit will be restricted to two children and this will affect those born after April 2017 with the income threshold for tax credits being reduced from £6,420 to £3,850.
Working-age benefits are to be frozen for four years and this includes tax credits and local housing allowance. Maternity pay and disability benefits are exempt
Rents in the social housing sector will be reduced by 1% a year for the next four years, however, higher-income households in social housing will need to pay rent at the market rate and 18-21-year-olds will not be entitled to claim housing benefit automatically.
There will be a new "earn to learn" obligation placed on the 18 – 21 year olds who wish to claim benefits.
Disability benefits will not be taxed or means-tested while state pension triple lock is to be protected.
Finally, for those who like a tipple or a smoke or a flutter, there is to be no rise in duty on alcohol, cigarettes or gambling!

Copyright © 2015 Morgans, All rights reserved.

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