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Summer Budget: What does it mean to you?

10th July 2015

Following up from Wednesday’s Budget, we look at what the various measures announced will mean for our clients:

Reductions in Welfare Payments. There are various measures – restricting Child Tax Credit to two children; High-earning Social Housing Tenants to pay commercial (i.e. higher) rents. It has been a harsh budget for some welfare claimants.

Boosts for low and middle earners. The Living Wage is to be phased in; the level at which one starts to pay income tax will rise to £11,000 and continue rising to £12,500 by 2020; 40% tax won’t kick in until you are earning £43,000. Overall it has been a good budget for these people.

Boosts for the Elderly

  1. The State Pension “triple-lock” will be protected. This is good news for pensioners – the State Pension will continue to rise by at least 2.5% each year through this Parliament.
  2. The family home will be taken out of Inheritance Tax for the first time. From April 2017 there will be a £1m family home allowance. This means that people will no longer be forced to sell the family home to pay an Inheritance Tax bill. Those with estates worth over £2 million will gradually lose the additional allowance.
  3. The Government confirmed that beneficiaries of pension members who die after age 75 will pay tax at their marginal rate not at the higher 45% rate as was previously thought. With the new ‘pensions freedoms’ this is one further step to making pensions even more attractive tax-efficient investments which can now be passed between generations.

Tax hits for the Wealthy

  1. Additional restrictions on pensions tax relief were announced. Those earning more than £150,000 a year will see their annual allowance tapered down to £10,000 from the current £40,000. Most people will not be affected by this – but high earners may now need to consider alternative investments to pensions.
  2. The rate of tax payable on dividends will increase. Company directors may need to restructure their income – and wealthy investors with large sums outside tax-efficient wrappers such as pensions and ISAs may end up paying more dividend tax.
  3. The abolition of permanent non-dom status – which allows wealthy foreigners and even British-born individuals who have inherited the status to limit the tax paid on earnings outside the UK – will hit those with the status who have lived in the UK for longer than 15 out of the past 20 years.

Pension and ISA savers reap benefits of dividend changes. The scrapping of the dividend tax credit of 10% – to be replaced by a £5,000 tax-free annual allowance for dividends – will benefit pension and ISA savers, as dividends within those tax wrappers will now be 100% tax-free.


Whilst many will gain from the Budget the Chancellor is actually raising more with increased taxes and reduced welfare than he is giving away.

To arrange a consultation meeting with a Cambrian adviser to discuss the Budget changes, call us on 01244 539595.

This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice as at 10/07/2015. You are recommended to seek competent professional advice before taking any action.