Budget July 2015: Key Highlights (08 July 2015)

08 July 2015

This was his seventh Budget as Chancellor, and the first since November 1996 for a majority Conservative government. He announced growth in the UK economy of 3% in 2014, with 2.4% growth forecast for 2015 and one million additional jobs predicted to be created by 2020. Stiff cuts to a range of welfare measures were set out – it really could be an emergency budget for those worst affected – along with various new personal taxation and pay announcements aimed at working people.

We have listed below the main points that could affect your financial planning and your household income. These are as follows:


From April 2016, annual tax relief on pension contributions is to be limited to £10,000 gross per annum from all sources for those earning £210,000 gross per annum and above. Individuals earning over £150,000 gross will no longer qualify for the full annual allowance of £40,000. This allowance will be curbed gradually – for every £1 of earnings over £150,000, the annual allowance will reduce by 50p to a minimum annual allowance of £10,000.

The government will consult on a plan to make "pensions more like ISAs". The Chancellor suggested that earners in the future could pay taxed income into a pension, receive a top-up from the government and then draw money free of tax. Watch this space…

Personal taxation

Under current rules, inheritance tax is charged at 40% on estates over the nil rate band of £325,000 per person. From April 2017, couples will have their nil rate band extended by £175,000, allowing them to pass a £1m family home on to their children or grandchildren tax free on death. This will be phased in from 2017 to 2018 and it should be noted that the allowance will be gradually withdrawn for estates worth in excess of £2m.

The tax-free personal allowance (the amount you can earn before you start paying income tax) will increase to £11,000 in the tax year 2016-2017 (currently £10,600). This is in line with the government's ambition to increase the personal allowance to £12,500 by 2020.

The point at which the higher rate tax band of 40% kicks in will rise from £42,385 to £43,000 from next tax year (April 2016).

Dividend tax credits are to be scrapped, with a £5,000 tax-free allowance for dividend income instead from April 2016. The rates of dividend tax will be set at 7.5% for basic rate tax payers, 32.5% for higher rate taxpayers and 38.1% for additional rate payers, meaning that those who receive significant dividend income will pay more than they would under current rules. Dividends paid within pensions and ISAs remain tax free and unaffected.

Permanent non-domicile status will be abolished from April 2017. Current rules allow some UK residents to pay lower levels of tax if their permanent residence is overseas. However, under the changes announced today, those individuals who have been resident in the UK for 15 of the last 20 years will pay full UK tax.

Public sector and minimum wage

  • The 1% gross per annum public sector pay rise is to continue for the next four years.
  • A new national living wage of £7.20 per hour for individuals aged over 25 will be introduced from April 2016. This will increase to £9 per hour by 2020.

Property owners

Tax relief will be restricted for higher earning landlords. Under current rules, individuals who let out a property can deduct their costs (including mortgage interest) from their profits before tax is paid. This means that higher earning landlords receive tax relief at 40%, or 45% if their income is over £150,000 gross per annum. By April 2020, this tax relief will be restricted to 20% for all landlords, regardless of income level.

Small businesses

Corporation tax has already fallen from 28% in 2010 to 20% today, with the aim of increasing the UK's global competitiveness. It was announced today that corporation tax will fall again, to 19% in 2017 and 18% in 2020.

The National Insurance employment allowance for small firms will increase to £3,000 (currently £2,000) from April 2016, cutting the employer National Insurance bill by £1,000.

As always, no individual advice is provided during the course of this blog. If you would like advice on the changes announced in the Budget then please contact the team at Chapters Financial Limited at our Woking or Guildford offices.

Vicky Fulcher
Financial Planner

Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899