The pre-election, 2015 Spring budget has announced lots of new projects for the future and extended some already announced, here are the highlights.
There is a lot on Personal Tax
Abolition of Personal Tax Return
HMRC plans to abolish Personal Tax Returns by 2020. They already collect much of the information required directly from your payroll and banks. You will have an online account and add to it MONTHLY your sole trader profits, rental income, dividends, etc. This may result in HMRC taxing you MONTHLY!
Transferable Married Couples Allowance
If neither spouse is a higher rate tax payer then they can elect to transfer 10% of one partner’s tax free allowances to the other, from 5th April 2015. This election is supposed to be made online but HMRC systems are not yet working so it currently needs to be done by letter.
The Chancellor has announced 3 significant changes to ISA’s – tax free savings accounts.
a) You may now take short terms loans form your ISA without losing the tax benefits.
b) On death, your wife or civil partner may inherit not your actual ISA but an ISA allowance equivalent to how much you had in an ISA – so that previously tax free savings of the family may stay tax free.
c) A new help to buy ISA is to be introduced where HMRC add up to £3000 to your deposit if you save this way.
Tax Free Interest
From April 2016 all bank interest will be paid Gross and everyone may receive up to £1,000 tax free.
This is addition to the current complicated starting savings rate regime, designed to benefit pensioners living off their savings.
Each person has a personal tax free allowance, a saving rate band and then a basic rate band. However the savings rate band is flexible dependent on the type and level of earnings/income; and the basic rate band is reduced by the savings rate band used.
These bands are used first by earnings, then by profits, then interest, and then by dividends. Earnings, profits and dividends can not use/create the savings rate band so pay the usual 20% tax of the basic rate band. Interest can create a saving rate band that pays a lower rate of tax, 2014/15’s maximum savings rate band is £2,880 with a tax rate of 10%. 2015/16’s starting rate band is a maximum of £5,000 with 0% tax.
HMRC will now be able to collect any tax bill, up to £17,000, via the payroll so make sure you check your tax codes! There is a cap though; he can only take 50% of your wages each month.
As previously announced, you may, from 5th April, draw down on your pension whenever you wish. Regrettably the advice lines for this are not yet open and HMRC wanted everyone to get advice before drawing down.
If you have already started to take your pension and purchased an annuity you may also now sell this to take a lump sum instead.
There are no changes to rules on making contributions, but there is a reduction in the cap on the size of your pension, with penalty tax for exceeding this.
Capital Gains tax is to be extended to non-residents, but some of the changes may effect UK residents who own property abroad.
Points to note:
- Non-residents only have to pay tax on the gain since 5th April 2015. You should therefore get a valuation now, but alternatively you can choose to calculate the gain on a time basis or even on the whole period of ownership if you prefer.
- No one may not elect to treat any home as their main residence in a tax year unless they are resident in that country or actually resident in that property for 90 midnights, (if you are resident in the UK for that many nights then you could be classed as resident in the UK – hence the way this rule has been drafted). As a non resident you can make this election on sale of the property, rather than within 3 year of a new purchase which is the rule for residents.
Tax rates will be the same as for UK residents i.e. £11,000 tax free, 18% if you are a basic rate tax payer and 28% if you are a higher rate tax payer. Only UK income will be taken into account when determining income for this purpose.
Tax is payable in the usual way via UK tax return if you have one.
Employment Tax, there are a few gems here:
Abolition of P11d Returns of Expenses and Benefits
A temporary extension of forms P11d to ALL staff this year is to be followed by the phased in abolition. Starting next year expenses will no longer need to go on returns. Employers can then volunteer to put benefits on the payroll MONTHLY rather than complete a P11d annually until the forms are eventually phased out altogether.
Small benefits of less than £50 are also to be exempt from 5th April 2015– so staff can be given birthday and Christmas presents and flowers when ill – cap of £300 per annum for office holders and their families.
Accommodation for live in careers is also to be an exempt benefit from April 2016.
The new Employers National Insurance exemption is being extended from under 21’s after 5th April 2015 to apprentices under 25 from April 2016.
For Business there is not much, but here is a quick run down
20% Corporation Tax rate for all from 5th April 2015.
Capital Allowances NOT to be reduced form £25,000 to £500,000 on 1st January 2016 – new rate not advised.
100% capital allowance on electric goods vehicle to be extended to 2018.
Goodwill on incorporation no longer qualifies for entrepreneur’s relief.
Amortisation of your own goodwill on incorporation no longer qualifies for Corporation tax relief.
Increased tax allowances for Research and Development.
New tax reliefs for Children’s TV and Orchestras.
Increased tax relief for Films and Cultural TV
Farmers averaging rules extended.
Tax deductions for donations towards flood defences.
New tax incentives for investing in Social Investments.
Umbrella company expenses are being targeted.