Income tax Rates
Tax-free personal allowance will be raised from £10,600 to £11,000 next year, as a step towards a target of £12,500.
Threshold for 40% rate raised from £42,385 in this tax year to £43,000 in 2016-17, on its way to the £50,000 target.
Dividend tax credit will be replaced by a new £5,000 tax-free dividend allowance.
But dividend tax rates are going up from zero to 7.5% for basic rate income tax payers, from 25% to 32.5% for higher rate taxpayers, and from 30.56% to 38.1% for additional rate payers.
Reform of the Wear and Tear Allowance
From April 2016, the government will replace the Wear and Tear Allowance with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings. Capital allowances will continue to apply for landlords of furnished holiday lets. The government will publish a technical consultation before the summer.
Restricting finance cost relief for landlords
The government will restrict the relief on finance costs that individual landlords of residential property can get to the basic rate of tax. The restriction will be phased in over 4 years, starting from April 2017.
Increasing the level of the Rent-a-Room relief
The government will increase the level of Rent-a-Room relief from £4,250 to £7,500 from April 2016.
Increasing the employer National Insurance contributions Employment Allowance by £1,000
The government will increase the annual Employment Allowance from £2,000 to £3,000. This will come into effect from April 2016.
Corporation tax will be cut to 19% in 2017, and then 18% from 2020.
The annual investment allowance, which was a temporary tax break for firms, will be set at £200,000 permanently from January 2016.
Those earning more than £150,000 will have their tax-free contributions allowance tapered away from its current £40,000 per year to a minimum of £10,000.
The government will reduce the Lifetime Allowance for pension contributions from £1.25 million to £1 million from 6 April 2016. Transitional protection for pension rights already over £1 million will be introduced alongside this reduction to ensure the change is not retrospective. The Lifetime Allowance will be indexed annually in line with Consumer Price Index (CPI) from 6 April 2018.
IHT on UK residential property of non-domiciles, including non-domiciles who are not UK resident
The government will legislate to ensure that, from April 2017, IHT is payable on all UK residential property owned by non-domiciles, regardless of their residence status for tax purposes, including property held indirectly through an offshore structure. A more detailed note setting out the scope of this proposals has been published alongside the Summer Budget. A full detailed consultation will follow later this year.
IHT and the main residence nil-rate band
The government will introduce an additional nil-rate band when a residence is passed on death to direct descendants. This will be £100,000 in 2017 to 2018, £125,000 in 2018 to 2019, £150,000 in 2019 to 2020, and £175,000 in 2020 to 2021. It will then increase in line with CPI from 2021 to 2022 onwards. Any unused nil-rate band will be transferred to a surviving spouse or civil partner. It will also 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. This element will be the subject of 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.