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George Osborne

Summer Budget 2015 – Key Tax Takeaways

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The Summer Budget was announced last week and in this blog post we’ll take a look at only those changes which will affect ordinary taxpayers and SMEs.

In his opening remarks, the Chancellor of the Exchequer, George Osborne, promised:

A Budget … to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country.

So, taking each of those goals in turn …

Higher Minimum Wages

With regard to the higher wages promise, Osborne announced that there would be a new National Living Wage of £7.20 per hour from April 2016 for those aged over 25 and over, rising to more than £9 per hour by the year 2020.

Lower Tax

With regard to the lower tax promise, the Personal Allowance (the amount people can earn before paying any tax) will increase – as anticipated – from £10,600 in the financial year 2015-16 to £11,000 in 2016-17. A longer term plan is to increase this still further to £12,500 by 2020. The ultimate ambition is pass a law to make sure that those working 30 hours a week and earning the National Minimum Wage will pay no tax whatsoever, although clearly this will need further clarification in due course.

Dividend tax will also be reformed. Here the existing dividend tax credit (this reduces tax paid on dividends from shares) will be replaced by a new £5,000 tax-free allowance on income from shares from April 2016 and this will be available to all taxpayers. To offset the cost of this to the Exchequer, those with more significant dividend income will see an increase in the tax rate they pay.

Inheritance tax will also be subject to changes from 2017-18. The idea is to allow individuals to each have a ‘family home allowance’ which they can pass on to their children or grandchildren, tax-free, when they die. This allowance will be added to the existing Inheritance Tax threshold currently set at £325k and will potentially allow property up to the value of £1m to be passed down from 2020-21 (see table below). For those with estates valued over £2m the allowance will be gradually withdrawn.

This is how the effective Inheritance Tax thresholds will look in 2020-21: Read more

The Chancellor’s Budget, March 2014

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The Chancellor, George Osborne, has now presented his March 2014 Budget to Parliament. There was lots of talk about the economy, growth forecasts, supporting UK businesses and employment – as well as some obvious political spin bearing in mind the European and General Elections are just around the corner – however we thought we’d concentrate on the most important changes, mainly in relation to tax itself as that’s what is going to affect Taxfile customers and readers the most. So here is our snapshot:

For individuals:

  • The threshold before earnings are subject to income tax (the ‘tax-free personal allowance’) is set to rise to £10,500;
  • The higher rate of tax will kick in for earnings above £41,865 from April 2014, rising again to £42,285 in 2015;
  • The first part of the ‘Help to Buy’ equity loan scheme for those aspiring to buy a new home is to be extended until 2020 (previously 2016);
  • The Stamp Duty on homes worth over £500k is to increase to 15% for those which are bought by companies;
  • Inheritance tax will be scrapped for members of the emergency services who “give their lives protecting us”;
  • Cash and Shares ISAs will be merged into a single New ISA (“NISA”). The annual tax-free limit for the NISA will be £15k (£4k for junior equivalent) from 1 July 2014.
  • From April 2015, pensioners will no longer be forced to buy an annuity with their pension fund. They will now be able to cash in as much or as little as they want to from their pension pot.
  • From June 2014, the amount people will be able to invest into Premium Bonds will increase to £40k (from £30k). From 2015 this will rise again to Read more

Time for ‘tax year end planning’ (pre-Budget)

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The budget will take place on March 19th 2014 so that gives us all just 5 weeks (at time of writing) for ‘tax year end planning’. So perhaps now is the time to start reviewing investments.

N.B. We’re not financial advisers (we are tax agents and accountants) so we can’t give advice on investments. But let us simply point out that if a portfolio shows signs of some gains, one can usually realise up to £10,900 in capital gains for the tax year 2013/2014, without a capital gains tax (CGT) liability coming into force.

It might also be worth considering making the most of ISA allowances before the tax year ends (April 5th). £11,520 can currently be invested into an ISA for the tax year 2013/2014, of which £5,760 maximum can be in a ‘Cash ISA’. Because you cannot carry forward ISA allowances into a new tax year, there is only very limited time remaining to make the most of the current ISA allowance. Tax benefits in relation to ISAs are well recognised in the UK, so much so that the Treasury has already looked at the possibility of capping their total value … and who knows what news the coming Budget will bring in this regard, particularly bearing in mind the continued need for austerity measures to reduce the budget deficit during these troubled economic times.

If you would like independent financial advice, Read more

Autumn Statement by the Chancellor of the Exchequer

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George OsborneOn 5 December 2013 George Osborne, Chancellor of the Exchequer, gave his Autumn Statement in Parliament. Key announcements included:

  • A rise for the Personal Allowance, as was long-anticipated, to £10,000 in 2014/15;
  • the higher 40% tax rate threshold also increasing to £41,865;
  • A new, transferable, tax allowance of £1,000 for married couples and those in civil partnerships from April 2015;
  • For employees aged under 21 employers will not have to pay Class 1 National Insurance (‘NI’) Contributions on earnings up to the Upper Earnings Limit;
  • Capital Gains Tax (‘CGT’) for future gains will now also apply to NON-resident individuals from April 2015 (previously this had been applied only to UK resident landlords);
  • For 2014/15 the annual ISA subscription limit will increase to £11,880 (of which £5,940 can be in cash);
  • There were also announcements relating to the continuing clamp-down on tax avoidance, improvements and plans for UK infrastructure, and the proposed inheritance tax (‘IHT’) simplification for trusts.

The full speech transcript can be read here or alternatively view the following video recording: Read more