In his 1962 State of the Union Address, JFK warned against basking in the warmth of recovery, and stressed that “repairs” were still required, to prevent the US from slipping back into recession. Fifty-three years later, and 3,500 miles away, the Government clearly see the UK as being at a similar point in its recovery.
In a year that will see a UK General Election, and perhaps as a result of rumours and apparent leaks, the 2015 Budget contained very few surprises on the tax front. The Chancellor spent much time focusing on past achievements and challenges ahead, and warning against returning to the “chaos of the past”.
So, how is he Government going to "fix the roof"? We’ll be looking at the main tax issues in more detail over the coming weeks, and, as with all tax changes, the devil is in the detail, but here’s our at-a-glance list of highlights from yesterday’s Budget:
- From April 2016, Farmers’ Averaging will be available over a five year period, increasing from just two years at present. This is something that we’ll be looking at each year for our farming clients, as we prepare the annual trading accounts.
- The lifetime allowance for contributing to your pension pot will reduce from £1.25 million down to £1 million from April 2016, but from April 2018 the allowance will be index linked. There is likely to be some form of protection offered, as with previous reductions, so if your pension fund is likely to be around £1 million this year and you haven’t opted for earlier protection, let us know.
- New rules limiting the application of the 10% capital gains tax rate to the disposal of assets used in a business but owned privately will apply immediately.
- The transferrable tax allowance for married couples and civil partners will increase to £1,100 for 2016-17. This is a new opportunity, applying from 6 April 2015, to allow a taxpayer who doesn’t use all of their personal allowance to transfer £1,000 of that unused allowance to their spouse, as long as they’re not a higher rate taxpayer. If we look after your personal tax affairs, we’ll be keeping an eye on this for you. If not, and you’d like to know more, just shout.
- A review of the Inheritance Tax implications of Deeds of Variation will begin, with a report due in the Autumn.
- The planned reduction of the Annual Investment Allowance down to £25,000 in January 2016 (from the current £500,000) won’t happen, but further guidance is yet to be given as to what the revised limit will be. Keep an eye on our website and enewsletters for more on this.
- A new more flexible ISA regime will come into operation from this Autumn, and there are plans to offer Government ‘bonuses’ for first time buyers using ISAs to save for a deposit.
- The tax free personal allowance will increase to £10,800 for 2016-17 and £11,000 for 2017-18, and the point at which higher rate tax becomes payable will rise to £42,700 and £43,300 respectively.
- Proposals were announced to modernise the tax system, collecting data digitally rather than via the completion of tax returns each year. Consultation will begin later this year on how the use of digital tax accounts might be implemented, with the new arrangements becoming fully operational by 2020. Springfords have always enthusiastically embraced new technology, so will be watching the consultation process with interest – we’ll keep you posted!
- A new personal savings allowance will be introduced from 2016, exempting the first £1,000 of investment income from tax (this will be reduced to £500 for higher rate tax payers and removed for those earning over £150,000).
- Class 2 national insurance for the self-employed will be abolished entirely in the next parliament – but we don’t know exactly when. Check out our Facebook page for future developments on this front.
There was also mention of a few points we already knew about such as the reduction in the corporation tax rate to 20%, the removal of national insurance contributions for employees under the age of 21, the introduction of rules to counteract the use of ‘pilot trusts’, and further guidance was provided on the new non-resident capital gains tax charge.
So, how’s your roof looking? If there are some holes that need attention, find out how Springfords might be able to help repair them. With the Election only weeks away, who knows whether we’ll see an Emergency Budget post May 2015, and a change in the weather again? If you’d like to chat through any of the Budget announcements and how they may affect you, just get in touch with your usual Springfords contact.