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Second Budget 2015 Round-up

28 Sep 2015

2 minute read

In what was arguably one of the most significant Budgets in recent years, Chancellor George Osborne took the opportunity to get Britain’s ‘house in order’ by announcing a series of changes affecting business, tax and welfare, on Wednesday 8 July.

Many of the headline-grabbing measures, including the new compulsory National Living Wage, sparked fierce debate in the ensuing weeks. Here we outline some of the major changes that could affect you and your business.


Business Measures

Annual Investment Allowance (AIA)

The maximum amount of AIA is currently £500,000 for all qualifying expenditure on plant and machinery from 1 April 2014 for corporation tax and 6 April 2014 for income tax. This limit will be reduced to £200,000 (instead of the previously announced £25,000) with effect from

1 January 2016.

The Employment Allowance

From April 2016 the Employment Allowance will increase from £2,000 to £3,000 per year. However, companies where the director is the sole employee will no longer be able to claim this allowance.

Corporation tax

The corporation tax main rate will be reduced to 19% for the financial years beginning 1 April 2017, 1 April 2018 and 1 April 2019, and 18% for the financial year beginning 1 April 2020.

Apprenticeships levy

A new levy will be introduced on large UK employers to increase the number of apprenticeship starts. Employers in England will be able to access this funding for apprenticeship training. Further details are expected to be set out in the Spending Review.

The new National Living Wage

From April 2016 a new National Living Wage (NLW) in the form of a premium on top of the

National Minimum Wage will be introduced for workers aged 25 and above. Initially set at £7.20, it is expected to rise to over £9 by 2020.


Personal Measures

Personal allowance

The income tax personal allowance will be increased to £11,000 for 2016/17, with a view to reaching £12,500 by 2020. The basic rate limit will rise to £32,000 for 2016/17.

Inheritance tax allowance

An additional nil-rate band will be introduced where a residence is passed on death to a direct descendant. This will be £100,000 in 2017/18 and will increase by £25,000 each year until it is £175,000 in 2020/21.

This will affect individuals, with direct descendants, who have an estate (including a main residence) with total assets above the IHT threshold (or nil-rate band) of £325,000. The changes mean that families could pass on up to a total of £1m to their children without paying inheritance tax.

Pensions annual allowance

From 6 April 2016, for those with income (including the value of any pension contributions) above £150,000, the benefits of pensions tax relief will be restricted by tapering away their annual allowance to a minimum of £10,000.

Legislation will also be introduced to align pension input periods with the tax year as well as transitional rules to protect savers who might otherwise be affected by the alignment of their pension input periods.

Dividend tax reforms

The Dividend Tax Credit, which reduces the amount of tax paid on income from shares, will be abolished from April 2016 and a new Dividend Tax Allowance of £5,000 a year will be introduced.

The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

Please contact Matt Wistow on 01865 292200 or email matt.wistow@shawgibbs.com to discuss how the measures announced in the Second Budget may affect you and your business.

Disclaimer: The measures detailed above were announced in the 2015 Second Budget and stand to be implemented at the time of this newsletter going to print.

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