Yesterday the Chancellor George Osbourne unveiled his first budget of the new parliament, the first Conservative budget since November 1996. George Osbourne has called it a ‘budget for working people’ but what does the budget really mean for you? We highlight the key points below:
- Personal tax allowance to be raised from £10,400 to £11,000 in 2016 with plans to raise the allowance to £12,500 by 2020. This means that people working 30 hours a week on the minimum wage will be exempt from paying income tax
- The point at which taxpayers pay the higher rate tax of 40% on their income will increase to £43,000 in April 2016 with a view the threshold will be further increased to £50,000 in subsequent years
- The government is to legislate a ‘tax lock’, setting a ceiling for the main rates of income tax, standard and reduced rates of VAT, and employer and employee (Class 1) National Insurance rates. Such a measure will ensure that rates cannot rise above their current (2015-16) levels
- A compulsory Living Wage of £7.20 an hour will be paid to people aged 25 and over from April 2016. This will be raised incrementally and is expected to reach £9 an hour by 2020
- National Insurance employer allowance will be increased to £3,000 in 2016
- The Inheritance tax allowance will be increased by 2017, allowing £1 million to be passed on tax-free. This reform will also ensure that those who downsize their home will not lose any of the allowance.
- The tax-free threshold for the Government’s ‘Rent a room’ scheme is to be increased from £4,000 to £7,500. Good news for lodger landlords who earn on average £8,335 per year in London and £6,071 across the rest of the UK through letting out accommodation in their home! However its not all good news, landlords who are higher rate tax payers will no longer be able to claim tax relief on their mortgage interest
- Permanent non-domiciled tax status will be abolished for anyone resident in the UK for more than15 years meaning they will be eligible to pay full UK tax from April 2017
- Dividend tax credit (which reduces the amount of tax paid on income from shares) will be replaced by a new £5,000 tax-free dividend allowance for all taxpayers from April 2016. This simpler system will mean that only those with significant dividend income will pay more tax
If you are baffled by the new budget or want more information on what it may mean for your taxes please contact us on +44 (0)20 3757 9290 or at email@example.com
For full information on all of the budget terms visit the government website here.