11 May Election Summary
To the surprise of virtually every political pundit and pollster, the Conservatives have started their journey to forming the next government. That means the party’s manifesto is more likely (but not guaranteed) to become reality. It also has implications for what was announced in March’s Budget, but not legislated for in that month’s ‘wash up’ Finance Act.
- By 2020/21 (the end of the forthcoming Parliament), the personal allowance would rise to £12,500 (cf. £10,600) and the higher rate threshold rise to £50,000 (cf. £42,385)
- In practice the Finance Act 2015 has legislated personal allowance increases for 2016/17 (£10,800) and 2017/18 (£11,000).
- Reduce the annual allowance for pension contributions for those with incomes of over £150,000 by £1 for each £2 of excess income, down to a minimum allowance of £10,000 at incomes of £210,000 and above.
- On the basis of earlier changes to the annual allowance, contributions made before any government announcement will not be affected.
- The annual allowance cut was designed to finance a main residence IHT exemption of £175,000, transferable between spouses and civil partners and phased out at the rate of £1 for each £2 of estate value over £2m (so gone by £2.35m).
- The Conservatives said they would further increase the tax on non-domiciled (increases came into effect this year), but gave no numbers.
- Like the other main parties, the Conservatives pledged to raise a considerable sum (£5bn a year by 2017/18) from anti-evasion and avoidance measures
- Also in line with the other parties, they gave very little indication how this would be achieved.
- Many experts feel that with all the measures taken to date, another £5bn is a very tall order.
- This is currently due to fall from £500,000 to £25,000 in 2016.
- The Conservatives promise to set a ‘new, significantly higher, permanent level for the Annual Investment Allowance’, but following the line Mr Osborne adopted in the Budget, do not say what this would be.
- This is set to fall to £1m from 2016/17, with another raft of transitional protections introduced.
- There is scope now for some people near or over that limit to top up ahead of this change and then claim the latest protection for their fund.
- 2016/17 this measure would give basic rate taxpayers an allowance of £1,000 for savings income (basically interest, but also offshore bond gains).
- Higher rate taxpayers would receive an allowance of £500 – worth the same £200 tax-saving, but additional rate taxpayers get nothing.
- This controversial idea is currently out for consultation, but with the Conservatives back in power it should now become a reality from 2016/17.