Summer Budget 2015

• Buy-to-Let properties: For a lot of our clients, the biggest bombshell relates to the tax relief on Buy-to-Let mortgage interest payments. This will be restricted to basic-rate income tax, phased in over a period of four years starting in April 2017. This continues what we perceive to be a very conscious effort from the government to keep a lid on property prices through means other than higher interest rates. The 10% ‘wear and tear’ allowance will also be scrapped from April 2016 – only costs actually incurred will be claimable. The Rent-a-Room limit will rise from £4,500 to £7,000 from April 2016.
• Inheritance tax: A new inheritance tax threshold will be phased in from 2017, adding an extra £100,000 (rising to £175,000 from 2020/21) for the value of one’s home on top of the existing Nil Rate Band (currently £325,000 and which has been frozen until at least 2020/21). This means up to £500,000 per person, or £1 million per couple, will be able to pass to dependants without incurring any Inheritance Tax. Downsizing shouldn’t jeopardise this new threshold, and estates worth more than £2 million will see it withdrawn in a tapered fashion and lost altogether for estates worth over £2.7 million.
• Pensions: As per the Conservative manifesto, the Annual Allowance will be tapered away for those earning over £150,000, starting from next year (thankfully not being introduced immediately). High earners will need to think beyond just pensions when it comes to saving for their retirement. This was expected, however there was a bigger surprise in the form of a Green Paper which will invite comments on a wholesale review of the UK pension tax-relief system. Finally, the ability to “sell” an annuity has been delayed.
• Income Tax: The Personal Allowance will rise to £11,000 (from £10,600 currently) and the higher rate tax threshold will rise to £43,000 from next year.
• Income Tax on dividends: Another surprise is a major reform of the way dividends are taxed. From next year, a new Dividend Tax Allowance of £5,000 will be introduced. The first £5,000 of dividend income will be tax-free, after which higher rates of income tax will apply (7.5% basic rate; 32.5% higher rate; 38.1% additional rate).
• Non-dom status: Permanent “non-dom” status will be abolished.  Anyone living in the UK for 15 out of the last 20 years will pay UK tax on their global financial affairs.  Labour had proposed going one step further in their manifesto.
• Corporation Tax: Will be cut from 20% today to 19% in 2017 and 18% in 2020, continuing the trend of the previous government which has reduced headline Corporation Tax from a level of 28%.
• Vehicle Excise Duty: tax bands on road tax will be changed from 2017 for new cars.  There will be three tiers based on emissions: Zero, Standard and Premium. 100% of Vehicle Excise Duty will go towards a new ‘Roads Fund.’ And new cars will require an MOT after four years instead of three.
• Welfare: The biggest jeers were saved for some radical reductions in welfare. However, these were offset by the biggest cheers for a new ‘National Living Wage’ which will be introduced for those aged 25 and over. This will be introduced at a rate of £7.20 per hour in April 2016 (70p higher than the current National Minimum Wage), rising to £9 per hour by 2020. This government seems to want everyone in work, regardless of their ability to work.