The Conservative Government issued its first Budget statement for 18 years which was described as a ‘big budget for a country with big ambitions’.
As for our personal finances, very welcome were the changes in personal tax allowances which will increase from £10,600 in 2015/16 to £11,000 in 2016/17. It will further increase to £11,200 from 2017/18.
Once the personal allowance reaches its target of £12,500 it will be uprated in line with the national minimum wage (NMW).
The higher rate threshold will increase to £43,000 from April 2016.
Dividend tax credit (which reduces the amount of tax paid on income from shares) will be replaced by a new £5,000 tax-free dividend allowance for all tax-payers from April 2016. Tax rates on dividend income will be increased.
The Lifetime Allowance for pension contributions is being reduced from £1.25 million to £1 million from 6 April 2016. Transitional protection for pension rights already over £1 million will be introduced. The Lifetime Allowance will be indexed annually in line with CPI from 6 April 2018.
Also, the benefits of pension’s tax relief are to be restricted for those with incomes, including pension contributions, above £150,000 by tapering their Annual Allowance to a minimum of £10,000 from April 2016.
There were further restrictions for landlords claiming tax relief on mortgage interest, but phased over a 4 year period, starting from April 2017, and wear and tear allowances will change to actual costs.
The level of rent-a-room relief will also increase from £4,250 to £7,500 from April 2016 to help those renting out their spare rooms.