Summary of 2015 Budget
This was touted as the ‘most political’ Budget in years, and it didn’t disappoint on that front. Stronger growth and falling unemployment proved too good an opportunity for the Chancellor to miss.
In fact, what that meant for the poor viewers was more than 30 minutes of economic ‘preamble’ as an introduction to one of the longest Budgets that I can remember (at more than an hour).
Here we summarise the main points in everything that came thereafter:
– Pensions: The Lifetime Allowance (the maximum amount an individual can accumulate in pensions over a working lifetime before incurring significant tax penalties) will reduce from £1.25m to £1m from April 2016. Labour announced similar plans two weeks ago. The Annual Allowance is to stay the same at £40,000 a year (whereas Labour have promised to reduce it). From 2018, the Lifetime Allowance will be linked to inflation (we’re not sure about the value of that sort of promise, since it was supposed to be linked to inflation when the threshold was first introduced at £1.8m in 2006).
– Inheritance Tax: The Government is to consult on changes to the rules around Deeds of Variation to reduce Inheritance Tax (like the one Ed Miliband used on his late father’s estate). Deeds of Variation can be used to make minor adjustments to Wills after death.
– Self Assessment Tax Returns: To be abolished and replaced with digital tax accounts. Accountants won’t be very happy.
– Beer duty: Reduced by 1p per pint. Reductions for cider drinks too.
– Petrol duty: September’s scheduled fuel duty rise has been cancelled.
– Income tax: The Personal Allowance (the first £10,000 of annual earnings that are currently free from income tax) will rise to £10,600 next year, £10,800 the year after and £11,000 the year after that. The threshold for higher rate tax will rise ahead of inflation to £43,300 in 2017/18.
– Fully Flexible ISAs: ISAs will be revamped so that money can be taken out and put back in later in the tax year. The range of permitted investments will increase as well.
– Help to Buy ISAs: The government will top up regular deposits for First Time Buyers by 25% up to a total £3,000 (akin to income tax relief). i.e. Save £12,000 and the government will add £3,000 to give a £15,000 deposit towards a home worth up to £450,000 in London and £250,000 outside London.
– VCTs and EIS: The rules around VCT and EIS investments will be reviewed to ensure compliance with EU state aid rules.
– Savings tax: The first £1,000 of interest earned on savings to be tax free. Higher rate taxpayers will get a £500 limit.
Much was leaked in advance so there weren’t too many surprises. Personally, I continue to be disappointed by the attitude of both parties towards pensions and the eagerness to reduce the Lifetime Allowance. It’s good news for ISAs, but we wonder how long before the government starts to clamp down on wealthy ISA investors as they are with wealthy pensioners at the moment.
We will of course update clients on an individual basis as and when the need arises, and will let you know of anything that we may have missed in the small print.