Budget 2015 – what’s in it for businesses and savers?
George Osborne’s budget is good for growth, but it could have a sting in the tail for some of our clients.
David Lloyd George, the former Prime Minister and Chancellor of the Exchequer, was fond of saying that “the most convenient time to tax the rich is when they are dead”. By this standard, today’s Budget revealed George Osborne is a very different stamp of politician. Not only did he bump up the Inheritance Tax level to £1 million when passing on the family home, but he also didn’t shy away from closing tax loopholes for non-doms and buy-to-let landlords.
In a long statement billed as being a ‘One Nation Budget’, Osborne pointed to an economy that is gaining strength and said his aim was to create a “higher wage, lower tax, lower welfare” society.
Certainly, there were some crowd pleasers thrown into the mix . An extra £8 billion was committed to the NHS. The bank levy will be phased out and replaced by an 8% surcharge on bank profits. £50m was divvied up for new cadet units in 500 schools, the RAF got a Fighter Command memorial and fuel duty – much to the relief of drivers everywhere – was frozen for another year.
But what about the Summer Budget 2015’s implications for businesses, savings and pensions and THP clients’ other key interests? We extracted the key changes and promises from the Chancellor’s speech as it happened.
Bad news for buy-to-let landlords who will only be able to offset mortgage interest against costs at the basic rate of tax – not the higher rate, as before. This will be phased in from April 2017. If you are affected, please get in touch and speak to one of our account managers. However, the rent-a-room relief scheme will rise to £7,500 – giving more tax free income to those who lease a room in their own home.
If you want to pass on your house to your children, you will not have to pay inheritance tax if your estate is worth less than £1 million. Great news, except for the fact that Osborne says it will be paid for by…
If you’re a high earner and you take advantage of putting money into your pensions tax free, you’ll only be able to pay in £10,000 annually before becoming liable for the levy. There will also be a Green Paper on pension reform in this parliament.
Corporation tax and dividends
Osborne threw businesses a fresh lifeline with a promise to cut Corporation Tax to 19% in 2017 and 18% in 2020. And in a perk for directors and shareholders, he introduced a new tax-free allowance of £5,000 for dividends.
Employment and apprenticeships
If you employ apprentices, large employers will have to pay an apprenticeship levy to fund more in-work training of young people. From April 2016, a new national living wage for those over 25 will be set at £7.20 per hour, reaching £9 by 2020.
Tax allowances and thresholds
Both low earners and high earners alike benefited from announcements to raise the tax-free personal allowance to £11,000 next year (and thereafter linking it to inflation) and ramping up the higher rate tax threshold to £43,000 at the same time.
Tax avoidance and evasion – and non-doms
As promised, the Chancellor came down hard on tax avoidance and evasion. From April 2017 the Government will be aiming to recoup an extra £7.2 billion from offshore trusts and investment managers, while pouring an extra £¾ billion into HMRC to go after tax avoiders – and allow them to name and shame them. In addition, anyone resident in the UK for 15 of the last 20 years will lost their non-dom status, bringing their tax affairs into line with other UK residents.
So, overall, unlike Lloyd George, the Chancellor hasn’t taxed the dead – he’s given their heirs more money to play with. Great news for those who will also benefit from positive changes for businesses, such as the reductions in Corporation Tax. But there’s a sting in the tail for many – especially those with non-dom status, ploughing money into pensions and those seeking to earn their income from buy-to-let properties. But coupled with reductions in the welfare bill and higher social housing rents for those who can afford them, the signs for the UK as a whole are promising over the coming years. Just be sure to speak to your client manager at THP to make sure you’re making the best of the new changes.
Read our free Summer Budget Report online