After a fairly low key budget earlier in the year we were expecting to see bigger changes in the Summer or Emergency Budget 2015 and we weren’t disappointed. We’ll be working through and speaking to clients about the impact of the changes, but in the meantime here is an overview of the key elements.
Taxation/Welfare- New National Living Wage of £7.20 to be introduced in April 2016 (to reach £9.00 per hour by 2020 – compulsory for working people aged 25 and over)
- £12billion in savings required through welfare changes
- £5billion in savings through crackdown on tax evasion and avoidance
- Corporation tax to be reduced to 19% in 2017 / 18% in 2020
- Non-domiciled taxation status to be abolished from April 2017
- Dividend tax credit to be replaced by £5,000 tax free allowance
- Inheritance Tax – up to £1million can be passed onto children without inheritance tax. This measure also introduces an additional nil-rate band when a residence is passed on death to a direct descendant. Any unused nil-rate band will be transferred to a surviving spouse or civil partner. It will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.
- NHS to receive a further £8billion over the next five years
- Public Sector pay rises of 1% for the next four years
- New youth obligation for 18-21 year olds to ‘earn or learn’
- Automatic housing benefit abolished for 18-21 year olds
- Rents in social housing sector reduced by 1% a year for next four years
- All working parents with children age 3 & 4 to receive 30 hours of childcare per week
- Working age benefits to be frozen for four years
- Benefits cap to be reduced to £23,000 in London and £20,000 elsewhere
- Threshold in tax credit to be reduced from £6,420 to £3,850
- Tax credit and universal credit limited to two children after April 2017
- Annual investment allowance set at £200,000
- Personal tax allowance – increased to £11,000 from April 2016 (further rises in line with minimum wage)
- Higher rate tax threshold – increased to £43,000 from April 2016
- Disability benefits will not be taxed or means tested
- Bank Levy to be reduced over the next 6 years / 8% surcharge on bank profits to be applied from January 2016
- Insurance premium tax to be raised from November 2015 to 9.5%
Pensions / Savings- Green paper to be issued on reform of pensions
National Security- Real increase in defence budget guaranteed every year
- Joint security fund of £1.5billion to be created by the end of Parliament
- Commitment to meet NATO pledge of 2% of national income on defence
Housing- Mortgage interest relief restricted to basic rate of income tax
- Reduced tax relief for buy-to-let landlords
- Rent a room relief to be raised to £7,500 from 2016
Education- New apprenticeship levy on all large firms
- To support Universities – From 2016/17 (academic year) maintenance grants to be replaced by loans for students. Loans only need to be repaid once the individual is earning over £21,000 per year.
Transport/Fuel/Energy- New car tax bands introduced for new cars from 2017
- Vehicle Excise Duty: £140 per year for 95% of new cars from 2017
- New roads fund will benefit from car tax payments
- First MOT to be extended to 4 years from 3
- Fuel duty to remain frozen this year
- Climate change levy to be removed
Northern Powerhouse- Further powers to be devolved to Greater Manchester (option available to other cities)
- £30million funding for Transport in the North
- Various commitments to growing transport, industry and skills to create growth of Northern cities
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