The UK budget announcements were delivered on 18 March 2015. The detail of the announcements is as follows:

Business tax measures

As already announced the UK corporation tax rate is 20% from 1 April 2015. The budget announcements include the introduction of a diverted profits tax. Legislation on the diverted profits tax will be issued next week and the measure will take effect from 1 April 2015.

Banks

The rate at which the bank levy is charged will rise to 0.21% from 1 April 2015. The reduced rate of levy that applies to longer maturity wholesale funding (where there is more than one year left to maturity), and which is charged at half the main rate, will therefore rise proportionately to 0.105% from 1 April 2015. Banks will also be affected by the restriction on carry forward and offset of tax losses from prior periods as already announced.

Oil and gas

From 1 January 2015 the supplementary charge imposed on oil producers in the UK or UK continental shelf is to be reduced from 30% to 20%. From 1 April 2015 a new investment allowance at 62.5% of the amount of investments will reduce the amount of ring-fence profits subject to the supplementary charge. Also, for periods ending after 31 December 2015 the petroleum revenue tax rate is to fall from 50% to 35%.

Creative industries

For creative industries there is increased tax relief for film and certain TV productions, a tax credit for orchestras and a consultation on tax relief for local newspapers.

The rate of tax credit available under the film tax relief is to rise to 25% from 1 April 2015 or the date of approval by the European Commission under State Aid provisions if later. The minimum amount spent in the UK to qualify for the high end television relief is to be reduced from 25% to 10%, thereby improving access to the relief. The cultural test to qualify for this relief will be aligned with the test for the film tax relief. Legislation is also to be introduced with effect from 1 April 2015 to give tax relief to producers of children’s television programmes.

Research and development tax credits

There will be a restriction in the amount of consumable items included in expenditure qualifying for the research and development (R&D) tax credit, where the taxpayer sells the products of its R&D activity as part of its normal business. The cost of materials incorporated in such products that are then sold will not be eligible for the tax relief.

Farmers

Farmers will be able to average their profits for tax purposes over five years. This is a great help for an industry in which profits can fluctuate greatly from year to year due to climate and other factors, and this measure will ensure that tax payments do not fluctuate greatly on a year on year basis.

Business rates

A review of business rates has already been announced.

National insurance

For the self-employed the Class 2 national insurance contributions are to be abolished during the next parliament. The employers’ national insurance contributions paid in relation to employees aged below 21 are to be abolished from April 2015, and employers’ national insurance contributions in respect of young apprentices are to be abolished from April 2016.

Individual income tax

The individual tax personal allowance is to rise to GBP 10,800 in 2015/16 and to GBP 11,000 in 2016/17 and the threshold at which the higher 40% rate begins is to rise faster than the rate of inflation. The transferable tax allowance for married couples is to be raised to GBP 1,100. Annual paper tax returns are to be abolished in the medium term and replaced by a digital tax account.

Tax on savings

For individuals there is an increase in the savings limit for individual savings accounts (ISAs) to GBP 15,240 and more flexible rules to allow people to withdraw savings from ISAs without incurring an interest penalty. A new Help to Buy ISA is to be introduced which will include a contribution of GBP 50 from government for every GBP 200 of savings in the ISA of people intending to buy a first property to live in where the property is worth up to GBP 250,000. There is also a new tax allowance which takes the first GBP 1,000 of annual income from savings out of the tax net.

Tax on pensions

The lifetime allowance for pension pots, in other words the highest amount the value of the pot can reach before extra tax is charged, is to be reduced from GBP1.25 to GBP 1 million. From 2016 people who have already taken their pension fund as an annuity will have more flexibility to sell the income from that annuity without complex contractual arrangements and without the current high tax charge. Also the changes announced last year to allow people on retirement more flexibility to choose how to use their pension pot are coming into effect on 6 April 2015, so from that date people taking a pension do not need to use the pension pot to purchase an annuity.

VAT

The VAT registration threshold is to increase to GBP 82,000 and the threshold for deregistration will increase to GBP 80,000. A VAT refund is to be introduced for charities providing palliative care. Also, supplies made by foreign branches will no longer be taken into account when computing the amount of VAT input tax on overheads that cannot be deducted by partially exempt businesses.

Excise duty

Fuel duty is to be frozen. There are reductions of 1p in duty on beer and 2% in duty on cider. Duty on scotch whisky and other spirits is to be reduced by 2%. The duty on wine is frozen. Tobacco duty will rise at 2% above the rate of inflation.

Other measures

These include the following:

• The government has announced a review on the use of deeds of variation to avoid inheritance tax;
• The automatic gift aid limit for charities is to be increased to GBP 8,000.
• Tobacco duty will rise at 2% above the rate of inflation.reduced by 2%; and duty on wine is frozen.