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Summer Budget 2015: A summary of the main provisions

This is only the fourth budget speech to take place in the summer in the last 47 years and it is the first from a majority Conservative Government for nearly two decades. Traditionally, the first Budget of a new Parliament contains the most tax raising measures, although from previous announcements we can also expect to see significant spending cuts.

The Chancellor described the Budget as a “Budget for working people” and a “One nation Budget”. We set out below our outline view of what the Budget means for you and your business. As always the devil will be in the detail of the press releases and draft legislation and we will be reviewing them and will provide further updates through our blog.

Economic Summary

  • OBR forecasts for economic growth 2.4% in 2015, 2.3% in 2016 and 2.4% in 2017.
  • OBR forecasts for deficit: 3.7% 2015/16, 2.2% in 2016/17,1.2% in 2017/18 and 0.3% in 2018/19.
  • OBR forecast 1 million more jobs over the next five years, although the Government’s ambition is for 2 million more jobs.

What the budget means for you


Dividend tax credit is abolished from 2016/17 and instead up to £5000 of dividend income will be tax free. The dividend income tax rates on dividend income above the allowance will increase by 7.5% to 7.5% (basic rate taxpayers), 32.5% (higher rate taxpayers) and 38.1% (additional rate taxpayers). Dividends in pensions and ISAs will be tax free.


Lump sum death benefits from registered pension schemes will be taxed at the recipient’s marginal rate of tax rather than 45% from April 2016. There will be a tapered reduction in the annual allowance to a minimum of £10,000 for individuals with income (inclusive of pension contributions) of over £150,000 per annum. A Green paper is to be published on future options for pensions including possibly treating them in the same way as ISAs.

Income Taxes

The income tax free allowance will rise to £11,000 per annum from 2016/17 and will rise thereafter in line with the minimum wage.

The threshold for paying higher rate Income tax will rise to £43000 per annum from 2016/17.

Capital Taxes

The previously announced rules on the changes to the taxation of relevant property trusts will be included in the second Finance Bill of 2015 and will apply to charges arising after the Bill receives Royal Assent. This will end the inheritance tax advantages previously enjoyed by multiple pilot trusts created on the same day.

A new transferable inheritance tax relief applicable against the value of family homes left to descendants will be introduced in phases from 2017. It will be £100,000 for 2017/18, £125,000 for 2018/19, £150,000 for 2019/20 and £175,000 for 2020/2021. Thereafter it will rise in line with CPI. The allowance will taper away by £1 for every £2 that the net value of an estate exceeds £2 million. It will be transferable between spouses and Personal Representatives can elect which of two owner occupied houses it should apply to. If someone is downsizing, or selling up altogether, after 8/7/2015 then the legislation, to be introduced in the Finance Act 2016, will ensure that the allowance is still available if assets of an equivalent amount, or a smaller house, is left to direct descendants.

The IHT nil rate band (currently £325,000) is to remain frozen until 2020/21.


The ability to offset mortgage interest payments on a buy-to-let property against income will be restricted to basic rate relief only and will be phased in over four years from April 2017.

The Rent-a-room income tax relief is to be raised to £7500 per annum from 2016/17.

The 10% wear and tear allowance will be replaced with a relief which allows residential landlords to deduct the actual cost of replacing furnishings.


Changes to Vehicle Excise Duties will be introduced from 2017 which will be banded according to the vehicle’s emissions; VED will go an earmarked New Roads Fund from that date.

Fuel duty is frozen again.

Student Finance

From 2016/17 student maintenance grants for less well off students will be replaced by Maintenance Loans with the maximum loan increasing to £8200 per annum. A consultation will take place on freezing the income threshold from which repayments of student debt are required at £21,000 per annum for five years.


From April 2017 all UK residential property owned by non-domiciled individuals will be brought within the charge to UK inheritance tax even when the property is owned through an offshore company or partnership. A consultation will be announced in the autumn over how this change will be delivered.

From April 2017 individuals who have been resident in the UK for more than 15 out of the past 20 tax years will be treated as deemed UK domiciled for all tax purposes. This will mean that such individuals will be liable to income tax on their worldwide income whether remitted to the UK or not.

In addition, from April 2017 an individual with a UK domicile of origin who acquires a domicile of choice elsewhere but then returns to the UK will on taking up residence here again will become UK domiciled for tax purposes. There are a number of ancillary measures to these announcements which we will comment on in due course.

What the budget means for your business

Corporation tax

Corporation tax is to be reduced to 19% in 2017/18 and 18% in 2020/21.

The Annual Investment Allowance for small and medium sized companies was due to fall to £25,000 at the end of 2015 and this will now remain permanently at £200,000.

The Employment Allowance will be increased to £3000 by 2016 but will not be available to companies where a Director is the sole employee.

New rules will be introduced on disguised employment when working through the medium of a personal service company.

A National Living Wage of £9 per hour by 2020 for over 25s will be introduced gradually from April 2016.


This is a Budget that contained some surprises; certainly the introduction of a National Living Wage by a majority Conservative Government did not appear to be anticipated unlike other announcements. The abolition of dividend tax credits will mean a tax increase for small company owners and those with larger share portfolios outside of tax protected wrappers. Given the increase in property prices the new transferable inheritance tax allowance for property is to be welcomed but a general increase in the IHT nil rate band would have been arguably fairer for people without children or property.