Summer Budget tax table: personal allowance rises

Summer Budget tax table: personal allowance rises

Today’s Budget included a wide-range of reforms to tax on pensions and inheritance, as well as an increased personal allowance.

TaxRates in 2015 March BudgetChanges in 2015 Summer Budget
Income tax

Personal allowance to increase from £10,600 in 2014-5 to £10,800 in 2015-6 and £11,000 in 2016-7

Higher rate threshold to rise by above inflation from £42,385 to £43,300.

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The government has therefore pledged to raise the personal allowance to £12,500 by the end of this parliament.

In 2016/17, the personal allowance will increase by £400 to £11,000.

Increases in the main rates of income tax have been ruled out but the higher rate threshold from will rise from £42,385 in 2015/16 to £43,000 in 2016/17 and to £43,600 in 2017/18

Pension allowancesAllowance to drop from £1.5 to £1.25m in 2014-15. Annual allowance cut from £50,000 to £40,000 in 2014-15

From April 2016 the government will introduce a taper to the annual allowance for those with adjusted annual incomes, including their own and employer’s pension contributions, over £150,000.

The government is consulting on whether there is a case for reforming pensions tax relief.

Capital gains tax

From 6 April 2015 non-UK resident, individuals, trusts, personal representatives and narrowly controlled companies will be subject CGT on gains accruing on the disposal of UK residential property.

CGT exemption for wasting assets only applies if the person selling the asset has used it in their own business.

Restricted access to private residence relief in circumstances where a property is located in a jurisdiction in which a taxpayer is not tax resident

The government will stop investment fund managers from using tax loopholes

to avoid paying the correct amount of capital gains tax on the profits of the fund payable to them.

Bank levy

Rate of the bank levy to rise to 0.21 per cent.

A new tax on banking sector profit will be introduced from 1 January 2016, set at a permanent rate of 8 per cent.

There will be a phased reduction of the bank levy rate, from the existing rate of 0.21 per cent to 0.18 per cent from January 2016, 0.17 per cent from January 2017, 0.16 per cent from January 2018, 0.15 per cent from January 2019, 0.14 per cent from January 2020 and 0.10 per cent from January 2021.

Inheritance tax

The government will review the use of deeds of variation for tax purposes.

A new transferable nil-rate band will be introduced from April 2017. This will apply when a main residence is passed on death to direct descendants, such as a child or grandchild.

The allowance will be up to £100,000 in 2017/18, up to £125,000 in 2018/19, up to £150,000 in 2019/20, and up to £175,000 in 2020/21.

There will be a tapered withdrawal of the main residence nil-rate band for estates with a net value of more than £2m. The existing nil-rate band will also remain at £325,000 from 2018-19 until the end of 2020-2021.

Corporation tax

Will be cut to 20 per cent from April 2015.

Will be cut further to 19 per cent in 2017 and 18 per cent in 2020
Tax on savings interest

From April 2016, 95 per cent of people will not have to pay tax on first £1,000 (or £500 for higher rate taxpayers) of interest.

From April 2016 the government will remove the Dividend Tax Credit and replace it with a new tax-free Dividend Allowance of £5,000 a year for all taxpayers.

Combined with the personal savings allowance, the govnerment says that from April 2016 individuals will be able to receive up to £17,000 of income a year tax-free, and separately invest up to £15,240 per annum through an ISA tax-free.

The dividend tax rates will be set at 7.5 per cent for basic rate taxpayers, 32.5 per cent for higher rate taxpayers and 38.1 per cent for additional rate taxpayers.