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The Budget – Initial reaction

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As is usually the case with budgets, those items which have the most relevance tend not to be reported in great detail, if at all, in the media. This was certainly the case for the first budget of the Conservative government.

In our view, the most significant items in this budget were as follows:

  1.  7.5% income tax charge to be applied to dividends received by basic rate tax payers. Higher rate taxpayers tax charge to be increased from 25% to 32.5%. To compensate for this tax charge, taxpayers are to be given an allowance to exempt the first £5,000 of dividend income from this charge.
  2. Interest to be paid gross by Banks and Building Societies. Basic rate taxpayers to have a £1,000 tax free allowance for interest received, with higher rate taxpayers having a £500 allowance. Presumably all basic rate taxpayers having interest of more than £1,000 will have to submit self-assessment returns.
  3. The introduction of additional exempt band for Inheritance Tax, which applies to residential property. This would appear to be, in effect, a general increase in the Inheritance Tax nil rate band, as the vast majority of taxpayers who are likely to suffer Inheritance Tax will almost certainly have a residential property.
  4. The removal of higher tax rate relief on mortgage interest, for taxpayers who have income from property rental.
  5. Corporation tax rates to be further reduced to 18%. This compares with the 22% planned by the last Labour government.

As always the exact impact of the budget will not be known until the legislation has been passed by Parliament.

Read 536 times Last modified on Wednesday, 05 August 2015 19:07
Tony Shackleford
Tony Shackleford

Chartered Accountant offering support to Limited companies and the self employed.

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