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What the 2015 Budget means for you

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On Wednesday 18th March 2015, George Osborne presented the final Budget before the General Election. The Chancellor was proud to repot on a Britain that is growing, creating jobs and paying its way.

The Rajani & Co opinion The Budget 2015 announcements were very positive and the UK is now firmly on track to recovery – partly as a result of lower fuel prices! This recovery is becoming more localised, and we relish the business growth we have advised on or witnessed in our local communities.

There is an air of positivity amongst our own clients and we are seeing an increase in business activity in Northamptonshire, as well as staff recruitment.

It was great to see an increase in the personal allowance which will help businesses, and the abolition of Class 2 NIC for sole traders which will help put money back in to business.

Whilst matched ISA savings come as a welcome break to first time buyers in a booming property market, it is difficult to understand how the already short supply of homes is going to accommodate the increased demand for homes.

But what does this mean for you?

At Rajani & Co we have created a budget breakdown without all the accountancy jargon, so you can understand how the 2015 budget will affect you, your family & your business. We’re here to help you navigate through the financial maze and come out the other side with sense of understanding.

What were the main Budget tax proposals?

• Increased personal allowances • Introduction of a new Personal Savings

Allowance • Changes to ISAs including the introduction of

a new type of ISA for First Time Buyers• Changes to pensions• Potential business rate reform in England• Entrepreneur’s Relief – changes to qualifying

conditions

Personal Tax

• Personal allowance increases to £10,600.• The band of income taxable at the 20% rate is

being decreased from £31, 865 to £31,785.• Higher tax threshold increased to £42,385.• Increased number of savers who are not

required to pay tax on savings income, such as bank and building society interest, as rate of tax for savings increases from £2,880 to £5,000.

• Provides a useful tax break for director-shareholders.

Personal savings allowance

From April 2016, a proposed new Personal Savings Allowance will benefit both basic rate and higher rate taxpayers, regardless of their level of earned income.

• Basic rate taxpayers: £1,000• Higher rate taxpayers: £500• Additional rate taxpayers won’t benefit from

the new allowance.

ISAs

The history of the ISA has been up and down but from April 6th 2015 the overall ISA savings limit will be increased to £15,420.

ISA savers will be able to withdraw and replace money from their cash ISA without counting towards their annual ISA limit for that year.

Help to buy ISA

From autumn 2015, first time home buyers will be able to get tax relief on their savings under the Help to Buy ISA. It will provide 25% tax relief on savings up to £12,000.

• If you save the full £12,000 then the government will add further £3,000 to your savings to use towards your first home.

• You will not be able to subscribe to two separate

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Cash ISAs in the same tax year.• Savings will be limited to a maximum single

initial amount of £1,000 with regular savings of £200 each month.

• Interest on the account is tax free.• Government 25% bonus can be claimed at

any time.• Property values can be no more than

£250,000 (£450,000 in London).

Pensions

Individuals aged 55 or over can access their money purchase pension savings as they choose. Pensions will be achieved in one of two ways:

• Flexi-access drawdown account – any amount at any time

• Pension fund – series of lump sums• The individual decides when to access funds

depending upon their other income in each tax year.

Lifetime allowance is the total amount of tax relieved pension savings an individual can ever have:

• Lifetime allowance will be reduced from £1.25 million to £1 million.

• The lifetime allowance will be indexed annually staring in 2018.

Business Tax

It’s not just your personal finance which might be undergoing changes, the Budget affects businesses too.

Corporation tax

• The main rate of corporation tax will be reduced from 28% in 2010 to 20%.

• The small profits rate is already 20% so it will become unified with the main rate.

Corporation tax relief may be available to companies when goodwill and intangible assets are recognised in the financial accounts. Relief is normally given on the cost of the asset as the expenditure is written off in accordance with Generally Accepted Accounting Practice or at a fixed 4% rate, following an election.

• Individuals will be prevented from claiming Entrepreneurs’ Relief (ER) on disposals of goodwill when they transfer the business to a related company.

• Capital gains tax will be payable on the gain at the normal rates of 18% or 28% rather than 10%.

• Government considered the previous tax relief on goodwill to be unfair to businesses which had always operated as a company.

Business rates – England

There is currently a review of national business rates in England which will be reported back on by Budget 2016.

The current system will be examined to look at how businesses use property and how to modernise the system to reflect the value of property.

Employment issues

Are you an employer? These issues raised in the budget may affect you:

• From April 2016 the government will change the rules to restrict travel and subsistence relief for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user.

Employer provided cars

Charges for working out the taxable benefit for an employee using an employer provided car will change. From April 2015, the percentage applied to each band of CO2 emissions will go up by 2% and maximum charge is increased to 37%.

This may discourage companies from retaining the same car, as newer cars often have lower CO2 emissions.

Zero emissions vans

The van benefit charge exemption for zero emission vans is to be phased out from 6 April 2015. For 2015/16 a charge will apply equal to 20% of the normal van benefit charge.

National Insurance contributions

• Employees under 21 – NIC will be reduced from 13.8% to 0%.

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• NIC for apprentices under 25 will be abolished.

• NIC employment annual allowance of £2,000 will be extended.

Review of employee benefits

• From 6 April 2015 there will be a statutory exemption for certain non-cash benefits in kind costing up to £50. An annual cap of £300 will be introduced for office holders of close companies and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of trivial benefits in kind each year exempt from tax.

• From 6 April 2016 the £8,500 threshold below which employees do not pay income tax on certain benefits in kind will be removed. There will be new exemptions for carers and ministers of religion.

• From 6 April 2016 there will be no tax liability on an employee for certain reimbursed expenses. This will replace the current system where employers have to apply for a dispensation to avoid having to report non-taxable expenses (on forms P11D). Also employees will automatically get the tax relief they are due on qualifying expenses payments.

• HMRC will be able to issue Regulations to allow employers to include taxable benefits in pay and thus account for PAYE on the benefits. Employers will therefore not have to include these items on forms P11D.

Capital Taxes

The current rates of Capital Gains Tax are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The rate for disposals qualifying for Entrepreneurs’ Relief is 10% with a lifetime limit of £10 million for each individual.

Entrepreneur’s Relief

Gains which are eligible for ER, but which are deferred into investments which qualify for the Enterprise Investment Scheme or Social Investment Tax Relief can now remain eligible for ER when the gain is realised.

ER will not be available to reduce CGT on gains which accrue on personally owned assets used in a trading business carried on by a company

or a partnership, unless they are disposed of in connection with a disposal of at least a 5% shareholding in the company, or a 5% share in the partnership assets.

Any other budget business?

Digital tax accounts

The government will introduce digital tax accounts and removing the need for annual tax returns. A digital tax account will enable individuals and small businesses to see and manage their tax affairs online.

• To begin with digital tax accounts will be introduced for five million small businesses and the ten million individuals by early 2016.

Gift Aid

It is proposed to increase the annual donation amount which can be claimed through the Gift Aid Small Donations Scheme to £8,000. This will allow charities and Community Amateur Sports Clubs to claim Gift Aid style top-up payments of up to £2,000 a year, with effect from April 2016.

Tax evasionThe government will toughen sanctions for those who evade tax by closing early the existing disclosure facilities. A tougher ‘last chance’ disclosure facility will be offered between 2016 and mid-2017, with penalties of at least 30% on top of tax owed and interest and with no immunity from criminal prosecutions in appropriate cases.

Tax avoidance

The government will introduce tougher measures for those who persistently enter into tax avoidance schemes that fail, and will develop further measures to publish the names of such avoiders and to tackle avoiders who repeatedly abuse reliefs.

Need advice?If you have any questions about this year’s Budget Summary or are interested in our services, please call 01933 276 327 today or alternatively fill in our contact form on our website.