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UK Budget 2015: Key Points for UK Taxpayers

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What does budget 2015 mean for you? Here is a summary of the key points from UK Budget 2015 that will affect UK taxpayers

Personal Taxation

Personal Allowance and Tax bands

The personal allowance will be raised to £10,600 in 2015/16 and then to £10,800 and £11,000 in the 2016/17 and 2017/18 tax years respectively.

From 5 April 2015 the UK tax band will be:

  • Basic rate (20%) - up to £31,785
  • Higher rate (40%) - £31,786 – 150,000
  • Additional rate (45%) - over £150,000

 

Savings income

The first £1,000 of savings interest is to be tax-free for basic rate taxpayers, and the first £500 for higher rate taxpayers from the start of the 2016/17 tax year.

 

Pensions and Savings

Pensions

Existing annuities can be ‘cashed in’ from April 2016.

Pensioners with existing annuities will be able to ‘sell’ their remaining annuities to a third party in return for a cash lump sum to use however they wish or to organize a drawdown arrangement. Income taken will be taxed at the individual's marginal rate of income tax, mirroring the new pension rules that came into effect from 6 April 2015.

Savings

ISA uplifts and “fully flexible” ISAs.

The ISA Annual savings limit will be increased to £15,240 from 6 April 2015 and ‘fully flexible’ ISAs introduced in Autumn 2015.

The biggest change here is the new “fully flexible” ISA, under the current UK ISA rules, if you had contributed your annual limit to an ISA and then made a withdrawal, you couldn't contribute any more to your ISA in the same tax year.

This restriction has been removed so that money can be withdrawn from an ISA and put back in the same year without losing any of the tax-free allowance.

The average UK tax rebate is £963

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The Help to Buy ISA

From Autumn 2015, for every £200 saved in a Help to Buy ISA, the government will contribute an additional £50, up to a maximum contribution of £3,000.

Accounts are one per person, rather than one per home, meaning couples buying together can receive an extra boost. For those saving towards the government’s upper limit, this would see a £12,000 deposit boosted to £15,000.

 

The ‘’Google Tax’’ Online Tax Returns

There has been plenty of commentry on the low amount of tax paid by companies like Google, Amazon, and Starbucks. To counteract this, from April 2015 the government will seek to tax profits made in this country (but diverted abroad) at 25%.

Although this won’t affect the “man on the street”, it will be reassuring to most people that big companies are paying their way too.

 

Online Tax Returns

Although it was expected in the near future, it was a surprise that HMRC announced plans to switch to online tax returns by 2020. This will mean an end to filing paper tax returns and the creation of digital tax accounts for over 50 million individuals and small businesses. 

Exactly how the new system will work is to be announced but the move is generally welcomed by UK tax professionals, including Taxback.com. HMRC’s antiquated processes are in need of a revamp, but we'll have to wait to see if the new system is an improvement for taxpayers or if it's just to put an onus on the taxpayer and their tax advisors to do HMRC’s work for them.

 

Other Announcements

  • The National Insurance upper earnings and upper profits limits will increase to stay in line with the higher rate threshold.
  • A new exemption for trivial benefits in kind – a statutory exemption for trivial benefits in kind costing £50 or less will be introduced.
  • A new exemption for reimbursed business expenses – certain reimbursed business expenses will be exempted from income tax – this will take effect from 6 Apr 2016.
  • CGT (Capital Gains Tax) for non-UK residents disposing of UK residential property – from 6 April 2015, non-UK resident individuals, trusts, personal representatives and narrowly controlled companies will be subject to CGT on gains accruing on the disposal of UK residential property on or after that date.
  • The tax rate for non-resident individuals will be the same as for UK resident taxpayers – 28% or 18% on gains above the annual exempt amount. This is a significant change to the UK CGT rules and a more detailed blog posting on how detail its effect will be online shortly.
  • The non-dom remittance basis charge – from 6 April 2015, the £50,000 charge payable by individuals who have been resident in the UK for at least 12 out of the last 14 tax years will be increased to £60,000. A new charge of £90,000 will be introduced for individuals who have been UK resident for at least 17 out of the last 20 tax years.

 

Working in the UK? Click here for help and advice on UK tax. 

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