2015 Budget

Red Budget CaseOur thoughts on the 2015 Budget with some highlights that we believe may be relevant for our clients:


From April 2016 a tax-free personal savings allowance will be introduced which will remove tax on savings income of up to £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. This will be in addition to the £5,000 zero starting rate band for savings income.

The personal allowance will be £10,600 for the 2015/16 tax year.

The basic rate tax limit will be £31,785 for 2015/16.

The zero starting rate band for the first £5,000 of savings income will be held for the 2016/17 tax year. This will be in addition to the tax free personal savings allowance.

From 6 April 2015, a zero starting rate band will apply for the first £5,000 of savings income, thereby replacing the 10% starting rate band for savings income.


From 6 April 2015 the annual capital gains exempt amount increases to £11,100 (from £11,000).

Some measures will be introduced in Finance Bill 2015 to restrict the availability of Entrepreneurs’ Relief (ER) in certain circumstances. These measures will have immediate effect (i.e. for disposals on or after 18 March 2015).

The new measures will aim to ensure a disposal of a privately owned asset will not qualify for ER, unless the asset is disposed of in connection with a disposal of at least a 5% shareholding in the company, or a 5% share in the partnership assets;

Relief is only available to those individuals who have a directly held stake of at least 5% in a company carrying on a trade;

Deny ER on a disposal of shares in joint venture structures that are not trading companies in their own right.

Entrepreneurs’ relief remains at 10% on cumulative lifetime capital gains of up to £10 million.


The use of deeds of variation for tax purposes will be reviewed.

The inheritance ‘nil-rate band’ is frozen at £325,000 until 2017/18.


The main rate of corporation tax cut from 21% to 20% for financial year 2015. It is intended that it should remain at 20% for 2016.


The government will transform the tax system over the lifetime of the next Parliament by introducing digital accounts to remove the need for individuals and small businesses to complete annual tax returns.

Consultation on a new payment process to collect tax and National Insurance through digital accounts instead of self-assessment.

The automatic deduction of 20% income tax at source by banks and building societies is intended to cease from April 2016.


From autumn 2015 a ‘Help to Buy ISA’ will become available to boost savings for first time home buyers. The government will pay £50 for every £200 saved subject to a maximum of £3,000 which will be paid at the time the property is bought.

From autumn 2015 the government will allow ISA savers to withdraw and replace money from their cash ISA without this counting towards their annual ISA subscription, provided they make a repayment in the same tax year as the withdrawal.

The government confirmed the National Savings and Investment bonds for pensioners (you have to be aged over 65 to qualify) would remain on sale until 15 May 2015.

From 1 June 2015 the National Savings and Investment Premium Bond investment limit will increase to £50,000.

From 6 April 2015 the ISA limit will increase to £15,240 (from £15,000) and the revised limit for the Junior ISA and Child Trust Fund will be £4,080.

Where a spouse or member of a civil partnership dies on or after 3 December 2014, the surviving spouse / partner will inherit an additional ISA allowance equal to the value of the deceased spouses’ ISA on the date of death. A further investment can be made on or after 6 April 2015.


The pension lifetime allowance to be reduced from £1,250,000 to £1,000,000 from 6 April 2016.

New transitional Fixed and Individual protection will be introduced.

The Lifetime Allowance will be indexed annually in line with CPI from 6 April 2018.

Consultation published on the development of a secondary annuity market.


Here are some of the highlights from the recent press coverage of the Budget:

Small rabbits, big promises

A Budget just a few weeks before a general election was sure to be highly political. So it was, for though George Osborne had little to give away, he made big promises.

Higher rate taxpayers got a smidgeon of an increase in the higher rate tax threshold this year but a promise of more increases in future years. Basic rate taxpayers got a promise of further rises in the income tax personal allowance. People with annuities got the promise of a consultation that would finish in the autumn, leaving the next government to decide whether this government’s plan to allow people to sell their annuities would ever be implemented. Savers who are basic rate taxpayers got the promise that from April 2016 they would not have to pay income tax on the first £1,000 of interest from their savings – another item for the next Chancellor’s in-tray. Would-be first-time home buyers got the promise of government help – a £3,000 top-up to £12,000 of savings – but would have to save for four and a half years to get it from when the scheme starts this Autumn.

No tax on savings. Simples!

George Osborne has proposed a measure that would give most savers tax-free interest from April 2016.

The idea is that for basic rate taxpayers, the first £1,000 of interest in a year would be free of tax; for higher rate taxpayers, the limit would be £500, so that individuals in each group would benefit by saving the same amount of tax (£200). The Treasury says 95% of savers, or 17 million people, would not pay any tax on their interest. This is a good idea that could save a vast amount of form filling, tax reclaims and so forth.

Gains tax relief for business owners is restricted

The Budget included measures to prevent the exploitation of entrepreneurs’ relief by artificial schemes.

From April 6th 2015, the relief – which reduces the rate of gains tax to 10% – will only be given if a stake of over 5% in a business is sold. Entrepreneurs’ relief is quite tricky and those intending to make use of it will need to talk to their accountant a year or two in advance.

Pension restriction is wrong

A new restriction on pensions in the Budget is plain wrong, said a Financial Times columnist.

Most people will think the reduction from £1.25 million to £1 million in the maximum you can have in a pension fund will not apply to them, but they are wrong. A pension fund of £1 million will produce an index-linked pension for life of under £30,000, and many people will be aiming for more than that. Under these rules, how close they are to their target will depend not just on what they save but on the return they get on their money, over which they have little control. So they could end up paying the penal tax rate of 55% on exceeding the £1 million threshold by accident. The columnist urged readers to write to their MPs asking that the limit should instead be applied to contributions, a system that would enable people to plan sensibly. The new £1 million limit from April 2016 will affect many more people, who will need to review their plans and savings.

The death of the tax return?

In his last Budget, George Osborne announced that pilot schemes will begin next year for digital tax returns, with the aim of eliminating the conventional forms by 2020.

By then, taxpayers will have digital tax accounts which they will be able to view at any time and make tax payments when they like. Tax experts said the timescale was very optimistic, and that most people with complex affairs would in any case still have to file a normal return – they expected digital accounts to work only for people with relatively simple circumstances. A form like this can never die…

Other notes and risk warnings

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily Donald Wealth Management (the Firm) and does not represent a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. It is not a promotion of Donald Wealth Management’s services.

Past performance is not indicative of future results and no representation is made that the stated results will be replicated. The value of a unit linked investment is not guaranteed and on encashment you may not get back the full amount invested. Errors and omissions excepted.

Donald Wealth Management is a trading style of Donald Asset Management Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom (FRN: 223784). Donald Asset Management Limited is registered in England and Wales under Company No. 4675082. The registered office address of the Firm is: Stable End, 12 Heather Court Gardens, Four Oaks, West Midlands, B74 2ST.