Draft Finance Bill 2015 – Personal Taxes

1. Income Tax

Personal allowance 2015/16 (for people born after 5th April 1938)

Autumn Statement legislation will be introduced in Finance Bill2015 to increase the Income Tax personal allowance for 2015/16 for people born after 5th April 1938 to £10,600. The basic rate limit will be £31,785. The higher rate threshold above which individuals pay Income Tax at 40% will be increased to £42,385.

National Insurance limits will increase to stay in line with the higher rate threshold. Income Tax rates will remain at 2014-15 levels for 2015-16.

Blind Person’s Allowance, Married Couple’s Allowance and Income Limit for 2015/16

The Finance Bill 2015 will increase Blind Person’s Allowance and Married Couple’s Allowance to people born before 6th April 1935 and the income limits by amounts equivalent toRetail Price indexation.

Bereavement Support Payment: Income Tax Exemption

Bereavement Support Payment (BSP) paid by the Department for Work and Pensions will be made tax exempt. TheBSP for eligible bereaved husbands, wives and civil partners commencement date is yet to be set by the Secretary of State or the Treasury.

The tax treatment of the existing benefits and pensions currently being paid, (which will be replaced for new claimants by the BSP), will not be affected.

Taxation of Resident Non-Domiciles: Remittance Basis Charge – 6th April 2015 Onwards

Changes will be made to the annual charge paid by non-domiciled individuals, resident in the U.K., who wish to retain access to the remittance basis of taxation. The charge for individuals who have been resident in the U.K. for at least 12 of the last 14 years will be increased to £60,000 and a new charge of £90,000 will be payable by individuals who have been resident in the UK for at least 17 of the 20 tax years. The charge for individuals who have been U.K. resident for at least 7 of the last 9 years has not changed.

The Government will also consult on making the election to pay the remittance basis charge apply for a minimum of three years.

Armed Forces Early Departure Scheme Lump Sums – from 1st April 2015

Legislation will amend the existing Income Tax exemption for lump sum payments made under the Armed Forces Early Departure Payment (EDP) scheme 2005, to ensure that lump sum payments made under the new EDP 2015 scheme are also exempt. There will be a corresponding disregard from Class 1 National Insurance Contributions (NICs).

Digital Gift Aid: Intermediaries

A greater role of intermediaries in administering Gift Aid will be allowed under the new law. It will be easier for donors to give to charity through an intermediary, such as independent fund raisers. A donor will not need to repeat information needed by HMRC to check the validity of a claim for Gift Aid repeatedly.

HMRC will become more flexible about what information charities need to obtain from donors to provide to HMRC in relation to Gift Aid claims.

Bad Debt Relief On Peer-To-Peer Lending

Individuals who make loans through peer-to-peer (P2P) platforms will be allowed to offset bad debts arising against the interest they receive from P2P loans when calculating their taxable income. These changes will have effect for loans made from 6th April 2015. Legislation will be included in Finance Bill 2016 and the Government will publish draft legislation in 2015. The Government will also consult with industry about developing new withholding tax rules for P2P platforms.

ISA Transfer From The Deceased to Spouses

Legislation will be effective from 2015-16, to allow savers an additional Individual Savings Account (ISA) investment allowance where their spouse or civil partner dies on or after 3rd December 2014.

This allowance will be the value of the deceased person’s ISA upon their date of death.

The Government is reviewing taxation of ISA assets during administration of a deceased person’s estate with a view to legislate again in the next Parliament to extend the current ISA tax advantages into this estate administration period.

ISAs New Annual Subscription Limits – from 6th April 2015

The ISA, Junior ISA and Child Trust Fund subscription limits will be increased for 2015-16. The annual ISA subscription limit for 2015/16 will be £15,240. The annual subscription limit for Junior ISA and Child Trust Funds will be £4,080.

ISAs: Qualifying Investments Including Crowd-Funded Debt Securities

The Government will consult on whether crowd-funded debt securities should be qualifying investments for ISAs and how this could be implemented.

Venture Capital Schemes: Social Investment Tax Relief (SITR)

The scope of the Social Investment Tax Relief scheme will be extended following consultation. The amount that can be invested in an individual organisation will be increased. The current limit of £275,000 over a 3 year period will be replaced with anew annual investment limit of £5 million, with an overall limit of £15 million on total investment.

In addition, legislation will be introduced in Finance Bill 2015 to extendSITR to social enterprises that engage in small scale horticultural and agricultural activities that will no longer qualify for subsidies under the European Common Agricultural Policy. The changes will take place as soon as possible on or after 6th April 2015, subject to clearance.

A technical consultation will be carried out in early 2015 on further changes to extend SITR to a wider range of social impact bonds and to provide for qualifying investments to be made indirectly, through a social investment form of a venture capital trust scheme, a ‘Social VCT’.

Miscellaneous Loss Relief Limitations

A new measure to counter avoidance of Income Tax involving miscellaneous losses will be introduced. This measure will deny relief where a loss, or income against which a loss could otherwise be relieved, arises as a result of someone being party to making arrangements a main purpose of which is to obtain a reduction in tax liability by means of miscellaneous loss relief.

Measures limit miscellaneous income against which a miscellaneous loss may be relieved to miscellaneous income that is chargeable to Income Tax under the same provision as the loss would have been had it been profits or income instead of a loss.

The changes denying relief where losses or income arise from tax-avoidance arrangements have effect from 3rd December 2014. The changes limiting relief to miscellaneous income of the same type will have effect for tax year 2015-16 and subsequent years.

2. Capital Taxes

Capital Gains Tax on Disposals of Residential Property: Non-Residents and Private Residence Relief – 6th April 2015

Capital gains tax will be extended to gains accruing to a non-resident person on the disposal of U.K. residential property. The legislation will also introduce a new rule to restrict access to private residence relief.

Capital Gains Tax: Entrepreneurs’ Goodwill Relief – 3rdDecember 2014

Claims to entrepreneurs’ relief in respect of gains on business Goodwill will be prevented where the goodwill has been disposed of to a limited company which is related to the claimant.

Capital Gains Tax: Entrepreneurs’ Relief (ER) and Deferred Gains

Individuals will be able to claim ER on gains which have been deferred under either the enterprise investment scheme (EIS) or social investment tax relief (SITR) provisions. Gains on disposals which take place on or after 3rd December 2014 will be eligible for ER after deferral, subject to the normal conditions being in force when the original disposal took place.

Inheritance Tax (IHT): Emergency Service Personnel Exemption – 19thMarch 2014

Inheritance Tax (IHT) exemption will be extended from armed services personnel who die on active service to all emergency service personnel and humanitarian aid workers who die in the line of duty or whose death is hastened by injury incurred in the line of duty.

IHT: Exemption for Medals and Awards

IHT exemption for awards for valour and gallantry will be extended to include medals and decorations awarded for service in the armed forces and emergency services. The extension will also apply to awards made by the Crown for public service or achievement in public life. The changes will have effect in relation to transfers of value made or treated as made on or after 3rd December 2014.

IHT and Trusts

The Government willnot proceed with the introduction of a single settlements nil rate band.

The Finance Bill 2015 will provide new rules about adding property to trusts on the same day to target IHT avoidance through the use of multiple trusts. The calculation of trust charges will be simplified by removing the requirement to include non-relevant property in calculation. Changes are also being made in areas of the relevant property trust legislation to close a gap.

IHT: New Digital Service Online

Minor changes will be made to the provisions dealing with interest to make amendments and to clarify the period from when interest is charged.This is part of the legislative changes to support the introduction of the new digital service announced in the Autumn Statement 2013.

Stamp Duty Land Tax (SDLT): Reform of Residential Rates

The legislation sets out new rates and rate bands for transactions where SDLT will be charged on residential property transactions, so that each rate will apply to the portion of the purchase price within the relevant band.

Annual Tax On Enveloped Dwellings (ATED): increase in charges

An increase in the annual ATED charges for properties valued at £2 million or more is introduced by the new Act. The new charges will apply for the chargeable period 1st April 2015 to 31stMarch 2016. The new charges will be:

£23,350 for properties valued at more than £2 million but less than £5 million.

£54,450 for properties valued at more than £5 million but less than £10 million.

£109,050 for properties valued at more than £10 million but less than £20 million.

£218,200 for properties valued at more than £20 million.

Capital Gains Tax on ATED-Related Gains

Legislation will be introduced to ensure the threshold amount above which disposals of residential property are subject to ATED-relatedCapital Gains Tax is aligned and consistent with the changes to the ATED charging bands. The amount will change in two steps, on 6th April 2015 and 6th April 2016.