Yesterday, saw George Osborne deliver the Summer 2015 budget, here we give you a few key facts from his announcement.
From 6th April 2016, the Personal Allowance (the amount you can earn before paying tax) will increase to £11,000 (previously scheduled to increase to £10,800), then from 6th April 2017, the Personal Allowance will increase further to £11,200.
The point at which higher rate tax will be payable will rise to £43,000 from 6th April 2016 and £43,600 from 6th April 2017.
National Living Wage
For all workers over the age of 25, a new National Living Wage will be introduced. From the 6th April 2016, this ‘premium’ on top of the National Minimum Wage will mean that all workers over the age of 25 will earn a minimum of £7.20 per hour rising to £9.00 per hour by 2020.
Inheritance Tax (IHT)
From 6th April 2017, the Government will introduce an inheritance tax threshold for a family home. The allowance of £100,000 (rising to £175,000 in 2020/21) will be added to the standard £325,000 individual threshold. The threshold will eventually rise to £500,000 where a family home is being passed on.
There is no IHT on transfers between spouses/civil partners so no IHT and so no inheritance tax applies on death where assets are being passed on to the surviving spouse/civil partner. Any ‘unused’ IHT threshold on the first death can be passed on to the surviving spouse/civil partner. This would mean that from 2002/21, properties worth up to £1million could be passed onto children without IHT being due on the property.
For those fortunate enough to have taxable income of over £150,000, the Annual Allowance will see their income reduce by £1 for each £2 of income over £150,000 with the maximum reduction down to £10,000. A £10,000 annual allowance will therefore apply to all taxable incomes over £210,000, and will apply from 6th April 2016.
The Lifetime Allowance will reduce from £1.25million to £1 million from 6th April 2016.
Buy to Let Tax Relief
Currently property investors can claim tax relief on their monthly interest repayments at the top level of tax they pay, meaning the wealthiest can claim as much as 45%. However, from April 2017, phased in over a four year period, landlords will only be able to claim the basic rate of tax, currently 20%.
Dividends (money paid by a company to it’s shareholders) are currently taxed at 10% for a basic-rate taxpayer, 32.5% for higher-rate taxpayers, and 37.5% for additional-rate taxpayers unless they are received within a pension or ISA. the budget announcement will see all dividends from 2016 will be tax free up to £5,000. After that, basic-rate taxpayers will pay 7.5% tax, higher-rate tax payers will pay 32.5% tax and additional-rate taxpayers pay 38.1%.
National Insurance Contributions
There were no announcements about any changes to National Insurance contributions.
Rent a Room Tax Break
For 18 years the amount you can earn from renting a room in your home, before tax becomes payable, has stood at £4,250 per year. From April 2016 however, this amount will rise to £7,500, saving a basic rate taxpayer £650 and a higher rate tax payer £1,300 per year. Don’t forget to opt into the scheme by completing a tax return and declaring this income if it’s over the £7,500 limit.
Housing Benefit for 18-21 year olds
The Government yesterday announced a new ‘earn or learn’ obligation for 18 to 21-year-olds. This means that anyone (exceptions will be made for the vulnerable and those in difficult situations) who falls in this age bracket must now be in employment or education and as part of this, 18 to 21-year-olds no longer have an automatic entitlement to housing benefit.
Reduction in family benefits
From April 2016, the total amount of benefits a household with children can claim will fall from £26,000 a year to £23,000 a year for those living in London, and to £20,000 for those living outside of London.
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