Whilst the Chancellor George Osborne had promised a ‘business as usual’ speech in his final Budget of the current Parliament, there were undoubtedly a few unexpected ‘giveaways’.
Savers hit by continuing low interest rates will be grateful for a new personal savings allowance for basic and higher rate taxpayers from April 2016, which will mean that 95% of taxpayers will no longer pay tax on interest earned – and the 20% bank withholding tax will be dropped.
Those with ISAs will, from autumn 2015, have the flexibility to make short-term withdrawals in a tax year without affecting the tax-free status of their savings.
Finally, a new ‘help to buy’ ISA will mean that those saving for a first home deposit will benefit from additional Government top-ups. All taxpayers will also benefit from planned increases in the personal allowance, increasing to £11,000 in 2017, whilst the threshold at which the 40% rate of tax applies will increase above inflation.
As anticipated, there were also changes to pensions. Those currently holding annuities will be able to sell their annuities from April 2016. The lifetime allowance which governs the maximum size of the tax favoured ‘pot’ is to be reduced from £1.25m to £1m from next year, but will be increased in line with indexation from 2018.
The annual allowance for pension contributions will however remain at the current £40,000 level, with tax relief still given at the individual’s marginal rate.
Good news also for drinkers, with a 2% reduction in duty for beer, cider and spirits (1p off a pint).
Motorists will also benefit from another freeze on the fuel duty increase scheduled for the Autumn.
Company car drivers continue to be hit with further increases in the benefit in kind charge announced from 2019/20 (following increases previously announced).
The focus on preventing tax avoidance continued, with the Chancellor announcing a consultation on Deeds of Variation, which currently allow a will to be varied by the beneficiaries post death.
There was also some tightening of the entrepreneurs’ relief rules, and an announcement of new legislation for serial tax avoiders.
Finally, in a fundamental change to the current system, the Chancellor announced the end of the annual tax return for both individuals and small businesses.
Instead, new ‘digital tax accounts’ will be pre-populated with information already held by HMRC, and will allow real time access for taxpayers to their tax affairs.
Further details will be published later this year, and by 2016 the first 10 million individuals are expected to have access to their personalised tax accounts.
- Stephen Hall, Tax Partner at Deloitte North East firstname.lastname@example.org