Corporation tax rates
The corporation tax rate will reduce from 20% to 19% from
2017. A further reduction to 18% will follow in 2020.
Corporation tax rates
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1
April 2015 to 31 March 2017
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20%
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1
April 2017 to 31 March 2020
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19%
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From
1 April 2020
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18%
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Corporation tax payment dates
For accounting periods starting on or after 1 April 2017,
the government will introduce new corporation tax payment dates for companies
to pay in quarterly instalments in the third, sixth, ninth and twelfth months
of their accounting period.
This
measure affects companies with annual taxable profits of £20 million or more.
Where a company is a member of a group, the £20 million threshold will be
divided by the number of companies in the group.
Annual investment allowance
The
annual investment allowance for all qualifying investment in plant and
machinery made on or after 1 January 2016 will be £200,000. The allowance is
currently £500,000.
Employment allowance
From
April 2016, there will be an increase in the annual employment allowance from
£2,000 to £3,000.
Companies
where the director is the sole employee will no longer be eligible to claim the
employment allowance from April 2016.
Restriction of corporation tax relief
The
corporation tax relief a company may obtain for the cost of ‘goodwill’, such as
the amount paid for the reputation or customer relationships of the business
purchased, will be restricted for all acquisitions and disposals on or after 8
July 2015.
This
measure removes the tax relief that is available when structuring a business
acquisition as a business and asset purchase so that goodwill can be recognised
and amortised over time.
This
advantage is not generally available to companies which purchase the shares of
the target company. Removing this relief reduces this distortion and levels the
playing field for merger and acquisition transactions.
R&D tax credits: universities and charities
A
measure to amend an anomaly in the R&D tax credits legislation was
announced so that universities and charities are unable to claim R&D
credit, in line with the original intention of the policy. This will apply to
expenditure incurred from 1 August 2015.
Controlled foreign companies loss relief restriction
From
8 July 2015, the government will remove the ability for companies to use UK
losses and reliefs against a controlled foreign company charge.
This
change should improve the effectiveness of the controlled foreign company
regime in both deterring the diversion of profits and taxing any diverted
profits.
Disposal of stock other than in trade
Amendments
are to be made to the legislation to stop corporate groups from using a
transfer pricing override to manipulate the value of assets in intergroup
transfers.
The
changes relating to trading stock and intangible assets have been introduced to
ensure that disposals made other than in the normal course of business are
brought into account for tax purposes at full market value.
Taxation of carried interest
The
government will introduce legislation to ensure that sums which arise due to
investment fund managers by way of carried interest will be charged to the full
rate of capital gains tax, with only limited deductions being permitted. This
measure will be effective from 8 July 2015.
Employee benefits and expenses
A statutory exemption is to be introduced from April 2016,
which is intended to simplify the tax system by introducing a statutory
exemption for trivial benefits in kind costing less than £50.
Self-employed national insurance contributions
Consultation will commence in autumn 2015 on abolishing
Class 2 national insurance contributions (NICs) and reforming Class 4 NICs for
the self-employed.
Bank corporation tax surcharge
A
supplementary tax of 8% on banking sector profits will be introduced from 1
January 2016.
The
tax will apply to the banks’ corporation tax profits prior to the use of any
existing carried forward losses. The first £25 million of profit within a group
will not be subject to this tax charge.
Where
a company’s accounting period straddles 1 January 2016, the period will be
split and the surcharge will apply to profits of the notional period commencing
on 1 January 2016.
Bank levy
A
reduction to the full bank levy rate will be implemented changing the rate from
0.21% to 0.18% in 2016.
New
legislation will also be introduced to change the tax base to UK operations
only from 1 January 2021.
Personal
Personal allowance increase
The income tax personal allowance will increase from £10,600
in 2015/16 to £11,000 in 2016/17. It will further increase to £11,200 from
2017/18.
Personal allowance indexation change
The government will legislate to ensure that once the
personal allowance reaches its target of £12,500 it will be uprated in line
with the national minimum wage (NMW). The aim of the proposal is to ensure that
any person on the NMW working 30 hours per week or less is unlikely to pay
income tax. A review into aligning the NMW timeline with the tax year was also
announced.
Higher rate threshold increase
The higher rate threshold will increase from £42,385 in
2015/16 to £43,000 in 2016/17. It will increase to £43,600 in 2017/18. There
will be a corresponding increase in the national insurance contributions upper earnings
limit to ensure it remains aligned with the higher rate threshold.
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Higher rate threshold
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2015/16
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£42,385
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2016/17
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£43,000
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2017/18
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£43,600
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Tax on dividends
The government has introduced major changes to the taxation
of company dividends. This is likely to increase the taxation liability of many
director/shareholders of limited companies.
The dividend tax credit will be abolished and replaced with
a new dividend tax allowance of £5,000 per year from April 2016. New rates of tax on dividend income above the
allowance will be introduced, which will be 7.5% for basic rate taxpayers,
32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
The announcements were not accompanied by any detail so the
impact of this change will become clearer as further documents are made
available.
Restricting finance cost relief for landlords
The government will restrict the relief on finance costs,
including mortgage interest payments, available to individual landlords of
residential property to the basic rate of tax. The restriction will be phased
in over a 4 year period, starting from April 2017.
Increase in rent-a-room relief
The level of rent-a-room relief will increase from £4,250 to
£7,500 from April 2016 to help the growing numbers of individuals renting out
their spare rooms.
Wear and tear allowance changes
The government will replace the existing wear and tear
allowance with a new relief that will allow all residential landlords to deduct
the actual cost of replacing furnishings from April 2016. Capital allowances will continue to apply to landlords
of furnished holiday lets. A technical consultation will be published on the new
relief before the summer.
Abolishing non-domicile status for long-term residents
Legislation will be introduced from April 2017 to ensure
that anybody resident in the UK for more than 15 of the past 20 years will be
deemed to be domiciled in the UK for tax purposes.
Non-domicile status for UK born individuals
From April 2017, any individual who is born in the UK to
parents who are domiciled here will not be eligible to claim non-domicile
status while they are resident in the UK.
Amendment to venture capital schemes
Subject
to state aid approval, new measures were introduced to amend enterprise investment
scheme (EIS) and venture capital trust (VCT) rules. Some of the measures
include:
· a new cap on the total investments a company may
raise under EIS, VCT or other risk finance investments of £12 million or £20
million for knowledge intensive companies
· preventing companies from using EIS or VCT
investments to acquire a business and a requirement that investors are
independent from the company at the time of the first share issue.
These
measures will take effect from royal assent to the Summer Finance Bill 2015.
Tax-free childcare
Due to a legal challenge, tax-free childcare is to be
launched from early 2017. In the meantime the existing scheme, employer supported
childcare remains open to new entrants until the new scheme is introduced.
Lifetime allowance
The lifetime allowance for pension contributions is to
reduce from its current level of £1.25 million to £1 million from 6 April 2016.
As on previous occasions when this allowance changes there
will be transitional protection for pension rights already over £1 million in
order to ensure that this change is not retrospective.
From April 2018 it is intended to index the allowance
annually in line with CPI, which means
that this should be the last of these reductions, which have seen the allowance
reduce from £1.5 million.
Reduced annual allowance
From April 2016 there will be a reduction in the £40,000
annual pension allowance where income, including pension contributions exceeds
£150,000.
The annual allowance will reduce by £1 for every £2 of
income in excess of £150,000, down to a minimum of £10,000.
Further changes to pension relief
A consultation document was published which will further
look at a reform of pensions tax relief. This will include reviewing whether
the taxation of pensions should be more closely aligned with the taxation of
ISAs.
Lump sum death benefits
From or after 6 April 2016, where someone dies at the age of
75 or over, taxable lump sum benefits will be subject to tax at the recipient’s
marginal rate of income tax.
Where the recipient is, for example, a trust or a company
and therefore does not have a marginal rate, the 45% charge will continue to
apply.
Equitable life
The Equitable Life payment scheme will close to new
claimants on 31 December 2015. Further endeavours are to be made to trace
remaining policyholders due £50 or more. There will be a further payment to
Equitable Life policyholders on pension credit who received 22.4% of their
relative loss. This payment will be for an additional 22.4% and is to be made
in early 2016.
Main residence and the inheritance tax nil-rate band
A change in line with the last 2 Conservative manifestos is
to be introduced although the change is not to commence until 6 April 2017 and will
not be fully implemented until 6 April 2020.
An additional inheritance tax (IHT) nil-rate band is to be
introduced when a residence is passed on death to direct descendants.
Additional nil-rate
bands
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One spouse
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Two spouses
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2017/18
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£100,000
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£200,000
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2018/19
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£125,000
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£250,000
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2019/20
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£150,000
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£300,000
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2020/21
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£175,000
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£350,000
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Any unused nil-rate band will be transferred to a surviving
spouse or civil partner. When added to the £650,000 existing nil-rate band (2 x
£325,000) this could provide a total nil-rate band of £1 million for a married
couple or civil partners.
From 2021/22 onwards the nil-rate bands will be increased in
line with the CPI.
It was also proposed that this new nil-rate band will be
available when a person downsizes or ceases to own a home on or after 8 July
2015 and assets of an equivalent value, up to the value of the additional
nil-rate band, are passed on death to direct descendants.
Final details are subject to a technical consultation.
There will also be a tapered withdrawal of the additional
nil-rate band for estates with a net value of more than £2 million. This will
be at a withdrawal rate of £1 for every £2 over this threshold.
The IHT nil-rate band
The government has confirmed that the current nil-rate band
remains frozen at £325,000 until April 2021 – previously this was frozen until
April 2018.
IHT and non-domiciles
From April 2017 the point at which a non-domiciled
individual is deemed domiciled for IHT purposes will change to 15 out of 20
years.
It is also intended to treat individuals who were born in
the UK to parents who are domiciled here, as UK domiciled while they are in the
UK.
IHT on UK residential property of non-domiciles
From April 2017 IHT will be payable on all UK residential
property owned by non-domiciles, including property held indirectly through an
offshore structure regardless of their status for tax purposes.
A detailed paper was also published which it is intended to
provide a basis for consultation later in 2015.
IHT avoidance
New rules are to be introduced to target avoidance through
the use of multiple trusts as previously announced in Autumn Statement 2014.
Tax credit debt recovery
The recovery of tax credits is to be more intensive. HMRC
will recover overpayments of working tax credit (WTC) from payments of child
tax credit (CTC), and recover overpayments of CTC from payments of WTC.
HMRC will extend the use of the private sector to improve
the collection of tax credit debt where this is in excess of £3,000 and has
already passed through the extending tax credits debt collection process.
Increase in the tax credits taper rate
From April 2016 the taper rate in tax credits will increase
from 41% to 48% of gross income. Once claimants earn above the income threshold
in tax credits, it will be withdrawn at a rate of 48p for every extra pound
earned.
Universal credit work allowances
From April 2016 the income thresholds in tax credits will
reduce from £6,420 to £3,850 per year.
Work allowances in universal credit (UC) will be abolished
for non-disabled childless claimants, and reduced to £192 per month for those
with housing costs and £397 per month for those without housing costs.
Claimants earning below these amounts will retain their maximum award.
Limit child element in tax credits and UC
The child element of tax credits and UC will no longer be
awarded for third and subsequent children born after 6 April 2017. Multiple
births and other exceptional circumstances will be protected from the 2
children limit.
Income rise disregard in tax credits
From April 2016 the amount by which a claimant’s income can
increase in-year compared to the previous year’s income before it is adjusted
is to be reduced from £5,000 to £2,500.
Benefits uprating
Most working-age benefits, for example Jobseeker's Allowance
and Income Support, will be frozen for 4 years from April 2016. This freeze
also applies to CTC and WTC (excluding disability elements).
Household benefit cap
The household benefit cap will be reduced to £20,000, except
in Greater London where the cap will be £23,000.
VAT on services enjoyed in the UK
HMRC will apply VAT ‘use and enjoyment’ provisions so that
from next year, it will be clear that all UK repairs made under UK insurance
contracts will be subject to VAT in the UK.
Insurance premium tax
From 1 November 2015 the standard rate of insurance premium
tax will increase from 6% to 9.5%.
Vehicle excise duty
Purchasers of cars first registered on or after 1 April 2017
will be liable to a first year rate, which starts at £10 for cars with
emissions of 1-50 g/CO2/km to £2,000 for cars with emissions in
excess of 255 g/CO2/km.
A flat standard rate of £140 will apply in all subsequent
years, except for zero-emission cars, which will continue to attract a £0 rate.
Cars with a list price of over £40,000 will attract a supplement of £310 per
year for the first 5 years in addition to the standard rate.
From 2020/21 all of the revenue raised from vehicle excise
duty in England will be invested in England on the English Strategic Road
Network.
Climate change levy
The climate change levy (CCL) exemption will be removed for
renewably sourced electricity from 1 August 2015. There will be a transitional
period for suppliers, from the same date, to claim the CCL exemption on any
renewable electricity generated before that date.
Aggregates levy
The 2014 legislation that suspended exemptions from the aggregates
levy is to be repealed. All exemptions apart from shale will be fully restored.
Once the reinstatement of exemptions comes into force on 1 August 2015,
businesses will be able to claim a refund of any aggregates levy paid since 1
April 2014 (with interest) on materials for which the exemption was found to be
lawful by the European Commission.
National living wage
A new premium for those aged 25 and over starting at 50
pence will be introduced leading to a new national living wage (NLW) of £7.20
in April 2016. It is envisaged that the NLW could reach the government’s target
of over £9 by 2020.
National minimum wage
The main NMW rate is set to increase by 20p per hour to
£6.70 on 1 October 2015. The premium referred to above means that a current NMW
worker working 35 hours a week can expect to see their income increase by over
£1,200 from April 2016.
Illegal work enforcement
Additional investment is to be made available in NMW
enforcement to tackle non-compliant employers and to help ensure that workers
are aware of their obligations and rights.
Student maintenance
Maintenance loan support will rise for students from low and
middle-income backgrounds up to £8,200 a year when studying away from home,
outside London.
From the 2016/17 academic year, maintenance grants will be
replaced with maintenance loans for new students from England, due to be repaid
when their earnings exceed £21,000 a year.
Childcare
Free childcare entitlement is extended to 30 hours a week
for working parents of 3 and 4 year olds from September 2017.
