The key announcements in the 2015 Budget are as follows:
Personal Taxation
Income Tax
From 6 April 2016, the personal allowance will be increased by £200 from £10,600 to £10,800.
From 6 April 2017, the personal allowance will be increased by a further £200 to £11,000.
The basic rate limit threshold will be increased to £31,900 for 2016/17 from £31,785. The personal allowance and basic rate limit will be £42,700.
The basic rate limit threshold will be increased to £32,300 for 2017/18. The personal allowance and basic rate limit will be £43,300.
The higher personal allowance for those born before 6 April 1938 will be removed with effect from 2016-17, so that everyone regardless of their age, is entitled to the same personal allowance.
By 2020 end-of-year tax returns will be scrapped in favour of "real-time" online accounts. It is planned that individuals and small businesses will submit accounts throughout the year via computer, tablet or smartphone.
A new personal savings allowance will come into effect in April 2016. Designed to create tax-free banking for 95% of the population. Basic rate taxpayers will be exempt from paying tax on £1,000 of savings income, higher-rate taxpayers will benefit from a smaller personal savings allowance of £500, and anyone earning more than £150,000 a year will not receive the benefit of the new savings allowance.
Plans have been announced to increase the number of years in which a self-employed farmer can average profits for income tax purposes from two to five, with effect on 6 April, 2016.
A new “flexible” ISA has been introduced. This will allow users to withdraw money from an ISA without losing any of their annual allowance. So long as Isa money is taken out and replaced during the same tax year, such a move would not count towards the annual Isa contribution limit, which is due to rise in any case to £15,240 this coming April.
Pension pot lifetime allowance will be reduced from £1.25 million to £1 million.
National Insurance
Class 2 NI contributions for self-employed is to be entirely abolished in the next parliament.
No employers NI on workers under 21, from April 2015, as long as they earn under £815 a week (£42,380 a year), and a similar policy will be introduced for young apprentices from April 2016.
Benefits In Kind
In line with a 2014 budget announcement, legislation will provide a benefit charge for vans which do not emit CO2 (zero emission vans), beginning in 2015-16.
The van benefit charge for zero emission vans will be 20% of the value of the van benefit charge for vans which emit CO2 in 2015-16, 40% in 2016-17, 60% in 2017-18, 80% in 2018-19 and 90% in 2019-20. From 2020-21, there will be a single van benefit charge applying to all vans.
In line with a 2014 budget announcement, legislation will provide a statutory exemption from tax for qualifying trivial benefits in kind (BIKs) costing £50 or less. Following technical consultation on the draft legislation, an annual cap of £300 will be introduced for office holders of close companies, and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of trivial benefits in kind each year exempt from tax. Corresponding legislation will also be introduced for National Insurance contributions purposes. These changes will have effect from 6 April 2015.
An exemption replaces the rules that require employers to either apply to HMRC for an agreement known as a ‘dispensation’ so that they can provide expenses and benefits free of tax and National Insurance contributions, or to report such expenses and benefits to HMRC. However the exemption will not apply where expenses are paid as part of a salary sacrifice arrangement. Following consultation, the legislation has been revised to ensure that the exemption cannot be used in conjunction with other arrangements that seek to replace salary with expenses. These changes will have effect from 6 April 2016.
Business Taxation
Corporation Tax
From 1 April 2015 corporation tax will be charged at 20% and there will no longer be the small profits rate or marginal rate of corporation tax.
R&D Tax Credits
In line with a 2014 budget announcement, legislation will restrict expenditure in respect of consumable items that qualify for R&D tax credits where a company sells the products of its R&D activity as part of its normal business. The revised definition of qualifying consumable items makes it clear that the cost of materials incorporated in such products that are then sold will not be eligible for the relief. This ensures that R&D tax credits remain well targeted in incentivising R&D investment. Draft legislation was published for consultation in December 2014. Following consultation the legislation clarifies that the restriction will not apply where the product of the R&D is transferred as waste, or where it is transferred but no consideration is received.
VAT
On 01 April 2015 the VAT registration threshold rises from £81,000 to £82,000 and deregistration threshold from £79,000 to £80,000.
In line with a 2014 budget announcement, the government will refund to charities providing palliative care the VAT they incur. The Finance Bill 2015 will include legislation to provide for refunds of the VAT these bodies incur on or after 1 April 2015 in relation to their nonbusiness activities.
Regulations will be introduced so that supplies made by foreign branches will no longer be taken into account when working out how much VAT incurred on overhead costs can be deducted in the UK. This will affect partly exempt businesses, and they will have to implement the change from the beginning of their next partial exemption tax year falling on or after 1 August 2015.
In line with a 2014 budget announcement, legislation will be included in Finance Bill 2015 to introduce a new VAT refund scheme for blood bike charities. It will enable these charities to reclaim the VAT incurred on the purchase of goods and services.
Excise Duties
Alcohol
As announced at Budget 2015, legislation will be introduced in Finance Bill 2015 to reduce the following alcohol duty rates by 2%.
- spirits;
- sparkling cider and perry not exceeding 5.5% alcohol by volume (abv);
- still cider and perry not exceeding 7.5% abv;
- beer between 2.8% and 7.5% abv; and
- wine and made-wine exceeding 22% abv.
The legislation will also reduce the duty rate for low strength beer (less than 2.8% abv) by 6%, overall duty rate for high strength beer (above 7.5% abv) by 0.75% and for still cider and perry exceeding 7.5% abv by 1.3%.
This will reduce the price of a typical bottle of spirits by 18 pence, a typical litre of cider by 1 penny, and a typical pint of beer by 1 penny. These changes will take effect from 23 March 2015. The duty rates on wine and made wine not exceeding 22% abv and sparkling cider of a strength exceeding 5.5% abv have been frozen.
Tobacco
The duty rates for all tobacco products will increase at a rate of 2% above the rate of inflation, based on the Retail Price Index (RPI), from 6pm on 18 March 2015.
Fuel
The scheduled increase in fuel duty for September has been scrapped.
Other Policies
“Help To Buy ISA”
A “Help To Buy ISA” will be launched for first-time buyers. Further information on this will follow when available.
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