So the second budget of 2015 is set for July 8th - what can we expect?
To the surprise of virtually every pundit and pollster the Conservatives will form the Government with an overall majority. It is widely predicted that the second budget of 2015 will allow the new Government to rubber-stamp some of its pre-election promises but do not rule out surprises!
By the end of 2020-21 (i.e the end of the forthcoming Parliament) the Personal Allowance would rise to £12,500 and the higher rate tax threshold to £50,000. This should be seen as good news for higher-rate tax paying doctors. Nevertheless, even when the higher rate tax threshold hits £50,000 in 2021 it is still short of the £60,000 required to keep pace with wage increases over the last 20 years.
From 2016-17 a Personal Savings Allowance would give basic rate tax payers an allowance of £1,000 for savings income and higher rate tax payers an allowance of £500.
The annual allowance for pension contributions for those with incomes over £150,000 to be reduced by £1 for each £2 of excess income, down to a minimum allowance of £10,000 at incomes of £210,000 and above. If you a high earning doctor earning over £150,000 your pension contribution options are therefore further curtailed. See us for alternative investment strategies.
The Lifetime Allowance for pensions is set to fall to £1m from 2016-17. This brings a whole new group of doctors into the 'Lifetime Allowance trap'. If you feel you may now be in danger of hitting the pension limits now or in the future, then get in touch for pension strategies.
Main Residence IHT Allowance
A main residence IHT exemption of £175,000, transferrable between spouses and phased out at the rate of £1 for each £2 of estate value over £2m (so gone by £2.35m). The effect of this for a couple is to give a total IHT exemption of up to £1m, assuming they own a home worth at least £350,000. Potentially good news for doctors with high valued homes looking to protect their estates.
The Conservatives said there would be a further tax on non-domiciled but no numbers were given. Hopefully more clarification on this will be given in the budget.
Anti-evasion and Anti-avoidance
Pledge to raise £5billion by 2017-18 from anti-evasion and avoidance measures. It is likely that a major thrust of the second budget will be cut even further tax saving strategies. If you are thinking of investing in a tax scheme outside the 'boring' strategies like ISAs and pensions then please do get in touch first to check before doing so. What may seem like a great tax-saving arrangement may well turn out to a be very painful exercise.
Annual Investment Allowance
The Conservatives promised a 'new and significantly higher, permanent level for the Annual Investment Allowance. This is currently due to fall from £500,000 to £25,000 in 2016. The second budget should give us details of this.
Overall Reaction And Prospects Going Forward
The investment market's initial reaction was to jump on the unexpected election result. However, the Conservative Government will not be in a position to make tax giveaways: the deficit is set to come in at £75billion in the current year and the Chancellor's aim is to turn this into a surplus by 2018-19. By that time total Government borrowing is still projected to be around 75% of GDP.
Why not get in touch for an initial complimentary review on how the latest changes will effect you and how we can help? Email email@example.com or telephone 0117 966 5699.