- Rate changes – the personal tax allowance will increase to £10,600 from April 2015 and by a further £200 a year for the next two years. The age related personal allowance will be removed completely from April 2016. The threshold for the point at which the 40p rate starts will increase above inflation from £42,385 this April to £42,700 the year after and £43,300 from April 2017. The combination of these changes means from April 2017 the 40p rate will only apply to income above £54,300.
- Annual Tax Returns scrapped – the current system will be overhauled and replaced with an online digital facility that can be added to and reviewed at any time, the good news is this will remove the January filing deadline! The bad news is that income will still need to be reported and tax will still need to be paid!
- Entrepreneurs’ Relief – further changes to this relief were announced effective from today to prevent loopholes being exploited. It targets both the use of company joint venture structures and where a withdrawal from a business is less than 5%. This adds to the changes announced in the Autumn Statement in respect of changes to ER on goodwill. The 10% rate continues for genuine business sales and no change has been made to the lifetime limit which remains at £10m.
- Farmers Averaging – the period over which farmers can average their profits for income tax will be extended from 2 to 5 years from April 2016. The details and mechanics will be consulted on over the coming months. This will help the farming industry have more control over their cash flow through controlling their income tax exposure.
- National Insurance Contributions – Class 2 contributions are to be abolished in the next Parliament. The Employment Allowance continues to give employers £2,000 towards National Insurance costs and further measures to abolish Employers NIC for under 21s and apprentices under 25 were confirmed.
- Savers – changes to make ISAs fully flexible were announced allowing money to be withdrawn and replaced in the same tax year without losing its beneficial tax status. This is set to be introduced in Autumn 2015. The Personal Savings Allowance looks to encourage saving further with plans to exempt from tax the first £1,000 of savings income from April 2016 (£500 for higher rate payers)
- Help to Buy ISAs – to encourage first time buyers, the Government will match special ISA savings for first time home deposits from this Autumn with £50 being matched to every £200 saved. There will be restrictions with a maximum £1,000 for the initial deposit and up to £200 per month, with an overall maximum bonus from the Government of £3,000.
- Pensions – the lifetime allowance will fall from £1.25m to £1m, with the allowance being index linked from 2018. No change has been made to the annual allowance.
- South West – Plymouth was announced as a new Enterprise Zone, alongside a £7bn investment in the South West’s infrastructure, in particular, the rail franchise and talk of ‘express trains’
- Fuel and Duty – the duty on cider and whisky will fall by 2p and the duty on beer will be dropped by 1p a pint. The planned rise in fuel duty from September has been scrapped, keeping fuel duty frozen again.
David K Crossley CTA, ATT
Member of the Chartered Institute of Taxation