Here are details of the Autumn Statement, or in reality the 2015 Budget subject to a change in Government.
PERSONAL ALLOWANCE AND TAX BANDS
The personal allowance for 2015/16 was originally scheduled to increase to £10,500 but it was announced that this will now be £10,600, so the tax free amount will now be £883 per month. If re-elected the Chancellor stated that this would be increased to £12,500 by 2020.
The point at which higher rate tax (40%) becomes payable will be £42,385 for 2015/16, meaning that the basic rate band will be £31,785. The Chancellor “promised” that this threshold would increase to £50,000 by 2020. The 45% rate will continue to apply to taxable income over £150,000.
Remember that the personal allowance is reduced where the taxpayer’s adjusted net income exceeds £100,000. The reduction is £1 of allowance for every £2 of excess income, resulting in a marginal tax rate of 60%. For 2015/16 this restriction is even wider than before with the increase in personal allowance to £10,600:
|Taxable Income||Marginal Rate|
|£100,000 to £121,200||60%|
|£121,201 to £149,999||40%|
TRANSFER OF PERSONAL ALLOWANCE
As previously announced, 2015/16 sees the introduction of a transferrable personal allowance for married couples and civil partners. As the amount that may be transferred is 10% of the basic personal allowance, this will now be £1,060.
The recipient must not be liable to tax above the basic rate and is eligible to a tax reduction of 20% of the transferred amount, in other words £212.
ISA LIMITS AND CHANGES IN 2015/16
The annual limit for savings in an ISA increases by £240 to £15,240 for 2015/16, but remember that the 50% restriction on cash was removed with effect from 1 July 2014. For Junior ISAs the limit will increase by £80 to £4,080, the same as the Child Trust Fund subscription limit.
There was an important announcement about the treatment of ISA savings on death in the Autumn Statement. It is proposed that the ISA savings will not lose their tax free status on death but, if transferred to the spouse, can be added to their tax free ISA savings.
CORPORATION TAX RATES
ANNUAL CGT EXEMPTION
This is set to be £11,100 in 2015/16, so is worth a useful £3,108 for higher rate taxpayers for whom the 28% rate applies.
CGT ON NON-RESIDENTS DISPOSING OF UK RESIDENTIAL PROPERTY
Following consultation during Summer 2014, the Government is proceeding with the introduction of a capital gains tax charge from 6 April 2015 on non-residents disposing of UK residential properties. Such individuals will not be able to treat the property as their Principal Private Residence, and thus are potentially exempt, unless there are substantial periods of residence in the property. The proposal is that the individual must spend 90 nights there each year to qualify for the relief, however we await further details.
GOOD NEWS FOR MOST HOMEBUYERS!
Stamp Duty Land Tax (SDLT) has often been referred to as a “slab” tax as there are significant increases in the tax payable at the £250,000 and £500,000 price points causing a cliff edge effect and distortions in the property market. This was particularly relevant around £250,000 as at that purchase price the rate went up from 1% to 3%, which meant £2,500 if the purchase price was £250,000 but an extra £1 meant a further £5,000 SDLT was payable.
Where residential property is purchased from 4 December 2014 onwards, the rates will be as follows.
|Purchase Price||SDLT Rate||Cumulative|
|Up to £125,000||NIL||NIL|
|£125,001 – £250,000||2%||£2,500|
|£250,001 – £925,000||5%||£36,250|
|£925,001 – £1,500,000||10%||£93,750|
For those of you who like to read all the small print, you can download a copy of the full Autumn Statement.