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Personal tax

Measures affecting individuals included:

Income tax

At the Autumn Statement, the Chancellor announced that the personal allowance for 2015/16 will be £10,600. The basic rate limit will be £31,785 and the higher rate threshold above which individuals pay income tax at 40% will be increased to £42,385.

ISA and Child Trust Fund limits

The Individual Savings Account (ISA), Junior ISA and Child Trust Fund annual subscription limits will be uprated in line with the Consumer Price Index, with the 2015/16 ISA limit being increased to £15,240, and the 2015/16 Junior ISA and Child Trust Fund limits both being increased to £4,080.

Transfer of ISAs to spouses on death

Currently, the ISA tax exemption ceases on the death of the investor and cannot be passed on to anybody, including spouses, even if they have saved the money together. From 3 December 2014 surviving spouses or civil partners will be able to inherit the ISA tax advantages by means of an additional ISA allowance (in addition to their normal annual ISA limit) equal to the value of that saver’s ISA holdings on their date of death, which they will be able to use from 6 April 2015 onwards.

55% tax charge on inherited pensions

From April 2015, beneficiaries of individuals who die under the age of 75 with remaining uncrystallised or drawdown defined contribution pension funds, or with a joint life or guaranteed term annuity, will be able to receive any future payments from such policies tax free where no payments have been made to the beneficiary before 6 April 2015. The tax rules will also be changed to allow joint life annuities to be paid to any beneficiary. Where the individual was over 75, the beneficiary will pay the marginal rate of income tax, or 45% if the funds are taken as a lump sum payment. Lump sum payments will be charged at the beneficiary’s marginal rate from 2016/17.

NICs for care workers

From April 2015 the £2,000 annual Employment Allowance for employer NICs will be extended to care and support workers.

Taxation of resident non domiciles – Remittance Basis Charge

Changes were announced to the annual charge paid by non‐domiciled individuals resident in the UK who wish to retain access to the remittance basis of taxation. The charge paid by people who have been UK resident for seven out of the last nine years will remain at £30,000. The charge paid by people who have been UK resident for 12 out of the last 14 years will increase from £50,000 to £60,000. A new charge of £90,000 will be introduced for people who have been UK resident for 17 of the last 20 years. The Government will also consult on making the election apply for a minimum of three years.

Social Investment Tax relief (SITR)

The Government will seek EU approval to increase the SITR investment limit to £5 million per annum per organisation up to a maximum of £15 million per organisation and to extend the relief to small-scale community farms and horticultural activities. Subject to State aid clearance, the changes will come into effect on or after 6 April 2015. Special purpose vehicles for subcontracted and spot-purchase social impact bonds will be made eligible for SITR through secondary legislation in Autumn 2015.

The Government will also consult on introducing a social Venture Capital Trust in the future.

Capital gains tax – Entrepreneurs’ Relief

The Government will allow gains which are eligible for Entrepreneurs’ Relief (ER), but which are instead deferred into investments which qualify for the Enterprise Investment Scheme (EIS) or SITR, to remain eligible for ER when the gain is realised. This will benefit qualifying gains on disposals that would be eligible for ER but are deferred into EIS or SITR on or after 3 December 2014.

Inheritance tax (IHT)

Legislation will be introduced to extend the existing IHT exemption for members of the armed forces whose death is caused or hastened by injury while on active service to members of the emergency services or humanitarian aid workers responding to emergency circumstances. It will have effect for deaths on or after 19 March 2014.

Additionally, from 3 December 2014 the existing IHT exemption for medals and other decorations that are awarded for valour or gallantry will be extended to apply to all decorations and medals awarded to the armed services or emergency services personnel, and to awards made by the Crown for achievements and service in public life.