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Summer Budget seminar presentation
The Summer Budget 2015 document provides an overview and analysis of the key announcements from the UK Summer Budget 2015. It discusses changes to personal taxes including increases to the personal tax allowance and higher rate tax threshold. It also covers reforms to inheritance tax, including a new main residence nil rate band. Business tax measures are analyzed such as reductions to the corporation tax rate and changes to dividend taxation and annual investment allowance limits.
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Summer Budget seminar presentation
- 2. The Summer Budget2015 Murray Graham Partner
- 3. The Summer Budget2015 • George Osborne “Britain deserves a pay rise” • Eliminating the deficit and boosting productivity • Continuing spending cuts
- 4. The Summer Budget2015 The economy and public finances • Growth forecasts on track (?) • Extra jobs • Deficit and debt reductions
- 5. The Summer Budget2015 • Impact upon local businesses • Good news or bad news?
- 6. The Summer Budget2015 Colin Fish Tax Partner
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- 9. Personal allowance indexation •Personal allowance to increase in line with equivalent of 30 hours per week at the national minimum wage • Takes effect once personal allowance has reached £12,500 • Government has objective to achieve this by the end of this Parliament
- 10. Higher rate threshold 2015/16£42,385 2016/17 £43,000 £42,700 2017/18 £43,600 £43,300
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- 12. UK born individuals •From April 2017 can no longer claim non-dom status if they are resident and are born in the UK to UK domiciled parents
- 13. Abolishing non-UK domicile statusfor long domicile residents • From April 2017 anyone resident in the UK for more than 15 of the past 20 years will be deemed to be domiciled in the UK • Will be deemed to be UK resident for income and capital gains tax purposes • Also will apply for inheritance tax (was 17 out of 20 years)
- 14. UK property ownedby non- UK domiciled individuals • Inheritance tax falls on UK assets for those not domiciled in the UK • This could be avoided through holding the property in a non-resident company • Inheritance tax will now fall on all UK property regardless of the structure in which it is held • Other IHT changes also (offshore trusts etc)
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- 16. Reminders of previous announcements •Personal Savings Allowance of £1,000 of savings income for basic rate taxpayers (less for higher rate taxpayers) – comes in April 2016 • ISA eligibility for P2P lending from April 2016 • ISAs more flexible so funds can be withdrawn and replaced – from April 2016
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- 18. Reminders • Taxation ofpensions on death – the 45% rate of tax applying to lump sums paid from the pension of someone who dies over age 75 will reduce to the marginal rate of the recipient – from April 2016 • The Lifetime Allowance is to fall to £1m from the current £1.25m from April 2016
- 19. Pensions – reduced allowancefor top earners • Applies to those earning more than £150,000 • Will apply from April 2016 • Limit is currently £40,000 per year • Will fall on a tapered basis to a minimum of £10,000 per year • £1 restriction for every £2 over £150,000 income
- 20. Pensions – reduced allowancefor top earners • £10,000 limit at £210,000 income • Pension input periods/salary exchange avoidance • Income level is calculated after adding back pension contributions (employee and employer) • Anti-avoidance looking at three years’ income • Annual allowance charge on employer contributions (can be paid by pension fund)
- 21. Consultation on pension taxrelief • Looks at questions such as: –Whether there should be different treatments for different types of scheme –Whether a simpler system would be better –Views on automatic-enrolment
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- 23. Agenda • VAT Budgetannouncements • Vehicle excise duty • Energy saving materials • Multi One Stop Shop (MOSS) • Pre-registration input tax • New build dwellings
- 24. VAT Budget announcements •VAT rates locked at 5% and 20% • Law to prevent items being removed from 0% and 5% list • IPT to rise 1/11/15 to 9.5% but with transitional rules • Tobacco and fuel duty levy to stay the same
- 25. Vehicle excise duty •From 1/4/17 newly registered vehicles pay based on emissions for first year • 1st year – Between £10 (50 g/CO2/km) - £2,000 (over 255 g/CO2/km) • 2nd year – £140 flat rate • £0 applying to nil emissions
- 26. Energy saving materials •Relates to: – Solar and PV panels – Wind and water turbines – Draught insulation for doors, windows walls etc – Ground and air source heat pumps – Micro combined heat and power units – Wood fuelled boilers • Supply and installation (together) charged at 5%
- 27. Energy saving materials •CJEU case using 5% reduced rate incorrect • 20% due on all but social housing cases • May try to ‘re-label’ under different area of reduced rate 5% law • HMRC to make announcement
- 28. Energy saving materials •Suppliers may need to adjust profit margin • Buyers may want to buy sooner rather than later • HMRC may invoke anti-forestalling regulations • Public letters sent to HMRC by industry
- 29. MOSS • From 1Jan 2015 –Suppliers selling B2C –E-services –To customers based in other EU member states • Must register for VAT in country where customer located irrespective of turnover
- 30. MOSS • E-services include: –Broadcasting and telecomms – Sale of apps – Sale of e-books – Videos on demand – Online gaming – Anti-virus software – Online auctions – Online automated training
- 31. MOSS • Turnover of€1 creates liability to register • Must obtain and retain evidence of customer location for 10 years • MOSS allows VAT registration in one member state and submission of a return to cover all member states • Payment made to local tax authority, which distributes as per your info on return • No VAT can be reclaimed on purchases • Different to UK VAT registration
- 32. Pre-Reg input tax •VAT on expenses incurred prior to registration • Goods: four years • Services: six months • New guidance issued by HMRC restricting claims
- 33. New build dwellings •Recent case: Roy Shields • New dwelling close to livery yard • Planning restriction meant ‘new dwelling’ criteria not met • Contractor charge = 20% VAT • Builder/clients – check you have right planning in place
- 34. The Summer Budget2015 Colin Fish Tax Partner
- 35. Taxation of landlords ColinFish Partner
- 36. Rent a roomrelief • Current limit - £4,250 • Limit is being increased to £7,500 from April 2016 • Applies where a room is rented out at an individual’s residence
- 37. Wear and tearallowance • Wear and tear allowance is being abolished from April 2016 • Wear and tear allowance gives tax relief of 10% of the rent received • Only applies to fully furnished properties • Renewals basis withdrawn two years ago – issue for landlords with unfurnished properties replacing white goods etc
- 38. Wear and tearallowance • Proposal is to replace wear and tear allowance with a relief for all landlords whereby tax relief is available for the actual cost of the furnishing • Furnished holiday lets will continue to be eligible for capital allowances
- 39. Tax relief forinterest • Currently interest can be deducted from rental income in full • Includes mortgage fees etc • From April 2017 this will be restricted • Special rules where there are rental losses • Full relief will continue for those with furnished holiday lettings
- 40. Tax relief forinterest Tax year Proportion of interest on which full tax relief available 2017/18 75% 2018/19 50% 2019/20 25% 2020/21 0%
- 41. Tax relief forinterest £100k house with £80k loan at 5% Current rules Post 2020 Rent £5,000 £5,000 Interest £4,000 £4,000 Tax £400 £1,200 Net position £600 (£200)
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- 43. Inheritance tax • Currentnil rate band is £325,000 • Will continue to be frozen at this level until 2021 • Rules relating to pilot trust/multiple trusts are being changed • Simplifications to the calculation of the ten year charge
- 44. Inheritance tax –main residence nil rate band • Gives an additional nil rate band • Applies where a property is passed on death to a direct descendant (children, grandchildren including step children and adopted children) • Any unused nil rate band can be passed to a spouse or civil partner
- 45. Inheritance tax –main residence nil rate band • Also available where someone downsizes or ceases to own a home after 8 July 2015 • Tapered withdrawal of the additional nil rate band for estates with a value of over £2m • Value of the additional nil rate band is the lower of the net value of the interest in the residential property or the maximum amount of the band
- 46. Inheritance tax –main residence nil rate band Tax year Maximum additional nil rate band 2017/18 £100,000 2018/19 £125,000 2019/20 £150,000 2020/21 £175,000
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- 48. Dividends • Dividend taxcredit abolished from April 2016 • A new Dividend Tax Allowance of £5,000 per year being introduced • New rates of tax will be: – Basic rate taxpayers – 7.5% (0% currently) – Higher rate taxpayers – 32.5% (25% currently) – Additional rate taxpayers – 38.1% (30.55% currently)
- 49. Dividends Effective rate oftax on higher rate salary is c.49% Level of income Effective rate of tax ignoring £5k exemption Basic rate 26% Higher rate 46% (40%) Additional rate 50%
- 50. Corporation tax Tax year commencing Corporationtax rate 1 April 2016 20% 1 April 2017 19% 1 April 2018 19% 1 April 2019 19% 1 April 2020 18%
- 51. Tax relief forwrite off of goodwill by companies • Currently if the trade and assets of a business are purchased by a company, the company can claim tax relief for the write off of the goodwill • This will no longer be allowed for acquisitions made on or after 8 July 2015 • Not much detail on changes at this stage
- 52. Annual Investment Allowance •Currently £500,000 (since April 2014) • Was planned to dropped to £25,000 on 1 January 2016 • Rate will now instead move to £200,000 on a permanent basis from 1 January 2016
- 53. Quick round upof other points • Modernising the taxation of corporate debt • Simplifying the ‘link company’ arrangements for consortium relief • CFC loss restriction • Disposal of stock between connected parties • VCT/SEIS/EIS changes to meet State Aid rules