Tax Implications of 2015 Budget For Individuals

Tax Implications of 2015 Budget For Individuals

Personal Savings Allowance

From April 2016, the government will introduce an allowance for savings income. This will remove

tax on up to £1000 of savings income for basic rate taxpayers and up to £500 for higher rate tax

payers. Additional rate taxpayers will not receive an allowance. From 2017, savings income that

remains taxable will be coded and will be taxable through the PAYE system.

ISAs to be more flexible

Individuals will be able to withdraw and replace money from their cash ISA in-year without it

counting towards their annual ISA subscription limit. However the rules will not be changed until the

autumn, after the government have consulted with ISA providers.

Income Tax Personal Allowances

2016/17 2017/18

Personal allowance: £10,800 £11,000

Basic rate band £31,900 £32,300

From 2016/17, there will be one Income Tax personal allowance regardless of an individual’s age.

The National Insurance upper earnings and upper profits limits will increase to stay in line with the

higher rate threshold.

Class 2 NICs

The government plan to abolish Class 2 NICs in the next Parliament and will reform Class 4 to

introduce a new contributory benefit test. The government will consult on the detail and timing of

these reforms later in 2015.

Annuities

From April 2016 people who are already receiving income from an annuity will be allowed to assign

their annuity income to a third party in exchange for a lump sum or an alternative retirement

product.

Lifetime allowance for pension contribution

From April 2016 the lifetime allowance for pension contributions will be reduced from £1.25million

to £1million. There will be transitional protection for pension rights already over £1million. The

lifetime allowance will be indexed annually in line with CPI from 6 April 2018.

End of the tax return?

It is planned to totally transform the tax system by introducing digital tax accounts. This may

remove the need for some individuals and small businesses to complete annual tax returns.