The main headline grabbers from George Osborne’s Budget announced 8th July 2015 are:
Taxation of Dividends
– The government will abolish the Dividend Tax Credit from April 2016 and introduce a new Dividend Tax Allowance of £5,000 per year.
Income from Rental Property
– The Wear and Tear allowance for furnished properties will be abolished from April 2016. Instead residential landlords will be able to deduct the actual costs of replacing furnishings.
– Capital Allowances will continue to apply for landlords of Furnished Holiday Lets
– Relief for mortgage interest that individual landlords of residential property can claim will be restricted to the Basic Rate of tax. This will be phased in over a four year period.
– The level of Rent-a-Room relief will be increased from £4,250 to £7,500 from April 2016
An end to non-Dom status, well, almost
– From 2017, anybody who has been resident in the UK for more than 15 of the last 20 years will be deemed to be domiciled in the UK for tax purposes.
– Also from April 2017, individuals born in the UK to UK parents who are domiciled here will no longer be able to claim non-domicile status whilst they are resident in the UK. Essentially this will apply to those who have established a domicile of choice elsewhere.
– However, some good news – the government will not introduce a minimum claim period for the remittance basis charge.
– The government have announced that they are going to monitor the growing number of salary sacrifice schemes.
– The Lifetime Allowance will be reduced from £1,250,000 to £1,000,000 from April 2016. Transitional protection for pension rights already over £1,000,000 will be introduced at the same time.
– The Lifetime Allowance will be indexed annually in line with the Consumer Prices Index from April 2018
– The Annual Allowance will be tapered from £40,000 to a minimum of £10,000 from April 2016 for those with incomes, including pension contributions, above £150,000.
– An additional nil rate band will be introduced when a residence is passed on death to direct descendants. This will be £100,000 in 2017/18, £125,000 in 2018/19, £150,000 in 2019/20 and £175,000 in 2020/21. This will effectively raise the combined nil rate band for a couple to £1,000,000.
– There will be a tapered withdrawal of the additional nil rate band for estates with a net value of more than £2,000,000.
– The nil rate band will continue to be frozen at £325,000 until April 2021.
– An individual who is classed as non-domiciled will now be deemed domiciled for Inheritance Tax purposes if they have been resident for 15 or more of the last 20 years.
The key changes to rates and allowances are:
Personal Allowances have been confirmed as:
£10,600 in 2015/16
£11,000 in 2016/17
£11,200 in 2017/18
Higher Rate Income Tax thresholds have been announced as:
£42,385 in 2015/16
£43,000 in 2016/17
£43,600 in 2017/18
The National Insurance upper earnings limit will also increase to remain aligned with the Higher Rate threshold.
Dividend Tax Rates from April 2016 will be:
7.5% for Basic Rate Taxpayers
32.5% for Higher Rate Taxpayers
38.1% for Additional Rate Taxpayers
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