On 8 July 2015 the UK government announced a further set of budget proposals for 2015/16. This summer budget 2015 follows the general election and contains revisions and additions to the original budget proposals presented in March 2015.

Corporation tax

The corporation tax rate is to decrease to 19% in 2017 and to 18% by 2020. The Annual Investment Allowance that permits 100% deduction for the purchase of some types of business asset including plant and machinery will be set permanently at GBP 200,000 from January 2016.

New corporation tax payment dates are introduced for companies with annual taxable profits above GBP 20 million. If a company is a member of a group the threshold is divided by the number of companies in the group. These companies are to pay corporation tax in quarterly installments in the third, sixth, ninth and twelfth months of the accounting period. This measure will take effect for accounting periods beginning on or after 1 April 2017.

Tax relief for the cost of business goodwill is to be restricted for all acquisitions and disposals on or after 8 July 2015.

A supplementary tax of 8% for the banking sector is to be introduced with effect from 1 January 2016. This will apply to the profits of banks before the deduction of losses brought forward. The first GBP 25 million of profits within a banking group will not be subject to the supplementary tax.

The UK government is to publish a business tax roadmap by April 2016. This will outline plans for business tax for the rest of the current parliament (until May 2020).

Bank levy

The bank levy is to be reduced from 0.21% to 0.18% in 2016 and then reduced in stages to 0.1% in 2021. As noted above there will however also be a supplementary tax on the banking sector.

Individual income tax

The tax free personal allowance is to be increased from GBP 10,600 in 2015/16 to 11.000 in 2016/17 and GBP 11,200 from 2017/18. The threshold at which the higher 40% rate of income tax begins will be increased from GBP 42,385 in 2015/16 to GBP 43,000 in 2016/17 and GBP 43,600 in 2017/18. The upper earnings limit for national insurance contributions (NICs) will increase in line with the higher rate threshold.

The “rent a room” relief given to people letting out rooms in their own home is to increase from GBP 4,250 to GBP 7,500 from April 2016.

The annual employment allowance on national insurance contributions paid by employers is to be increased from GBP 2,000 to GBP 3,000.

Taxation of pensions

The implementation of measures for the secondary market in annuities has been delayed until 2017. Further information on the introduction of these measures will be issued later in 2015.

The lifetime allowance for pension contributions is to be reduced from GBP 1.25 million to GBP 1 million from 6 April 2016. There will be transitional relief for pension rights over GBP 1 million. The lifetime allowance is to be indexed annually in line with the consumer price index (CPI) from 6 April 2018.

Pension tax relief will be restricted for individuals with income (including pension contributions) more than GBP 150,000 by tapering their annual allowance (for pension contributions) to a minimum of GBP 10,000.

There is also to be a consultation on pension tax relief. A consultation paper has been published on strengthening the incentive to save. This invites comments on issues such as simplifying the system so that the complexity is not a barrier to individuals planning their pensions; reforms to give individuals greater responsibility in saving for retirement; and a reform of the treatment of employer pension contributions.

Taxation of dividends

The current dividend tax credit is to be replaced by a GBP 5,000 tax free dividend allowance from April 2016. The new rates of dividend tax on income above the allowance are 7.5% for basic rate taxpayers; 32.5% for higher rate taxpayers and 38.1% for those on the additional rate.

Non-domiciled individuals

From April 2017 any non-domiciled individual who has been resident in the UK for more than fifteen of the past twenty years will be deemed to be domiciled in the UK for tax purposes. A technical consultation will be published later in 2015.

Also with effect from April 2017 individuals born in the UK to UK domiciled parents will not be able to claim non-domiciled status while they are UK resident.

Tax relief restriction for individual landlords

Tax relief for individual landlords on costs including mortgage interest will be restricted to 20% for all individuals by April 2020. From April 2016 the wear and tear allowance on furniture etc will be replaced by a new system giving tax relief only when furnishings are replaced. The capital allowance system will continue in the case of furnished holiday lettings.

Inheritance tax

An additional Nil rate band (referred to as the family home allowance) is to be introduced from 2017/18 where a residence is passed on death to direct descendants. This will be an additional GBP 100,000 to the Nil rate band in 2017/18 when passing on the family home, rising to GBP 125,000 in 2018/19, 150,000 in 2019/20 and GBP 175,000 in 2020/21. After that the additional Nil rate band will increase in line with the consumer price index. The family home allowance will be available where a person has downsized or ceased to own a home after 8 July 2015 and assets of an equivalent value are passed on death to direct descendants.

There will be a tapered withdrawal of the family home allowance in the case of estates that are worth more than GBP 2 million. The allowance will be withdrawn at a rate of GBP 1 for each GBP 2 over the GBP 2 million threshold.

A non-domiciled person will be deemed to be domiciled in the UK for inheritance tax purposes if resident in the UK for fifteen of the past twenty years.

Insurance premium tax

The standard rate of Insurance Premium Tax will increase from 6% to 9.5% from 1 November 2015.

Tax Administration

The government announced a number of measures including more investment between now and 2020 to HMRC to combat tax evasion and non-compliance; increasing the number of criminal investigations undertaken by HMRC into serious tax crime, focusing on wealthy individuals and companies; allowing HMRC access to wider data from online intermediaries and electronic payment providers; and a general anti abuse rule penalty.