Tax Changes 2015 - 2016

Happy New Tax Year

7 April 2015

Happy and Tax aren’t often seen in the same sentence as each other but a New Tax Year is normally a happy event with increases to personal allowance bands meaning contractors can normally see a bit more in their take home pay each week.

Personal Taxation Changes:

(which affect all tax payers)

Bands of taxable income and corresponding tax rates

 

2014-15

2015-16

 

Per cent of income / £ a year

 

Basic rate

20%

20%

Higher rate

40%

40%

Additional rate

45%

45%

Starting rate for savings income (*)

10%

0%

Dividend ordinary rate

10%

10%

Dividend upper rate

32.5%

32.5%

Dividend additional rate

37.5%

37.5%

Trust rate

45%

45%

Starting rate limit (savings income)

£2,880

£5,000

Basic rate band

£0 - 31,865

£0 - 31,785

Higher rate band

£31,866 - 150,000

£31,786 - 150,000

Additional rate band

Over £150,000

Over £150,000

(*) From 2008-09 there is a starting rate for savings income only. If an individual’s taxable non-savings income exceeds the starting rate limit, then the starting rate for savings will not be available for savings income.

 

Income tax allowances

 

2014-15

2015-16

Change

 

£ a year

 

 

Personal Allowance

 

 

 

those born after 5 April 1948

10,000

10,600

600

those born between 6 April 1938 and 5 April 1948

10,500

10,600

100

those born before 6 April 1938

10,660

10,660

-

Income limit for personal allowance (*1)

100,000

100,000

-

Income limit for personal allowances (born before 6 April 1948) (*2)

27,000

27,700

700

Married couple’s allowance (*3)

 

 

 

maximum amount (*4)

8,165

8,355

190

minimum amount (*5)

3,140

3,220

80

Blind person’s allowance

2,230

2,290

60

Transferable Tax Allowance for married couples and civil partners (*6)

-

1,060

-

 

*1 The personal allowance reduces where the individual’s income is above this limit by £1 for every £2 above the limit. This applies regardless of the individual’s date of birth.

*2 This allowance reduces where the individual’s income is above the income limit by £1 for every £2 above the income limit until it reaches the level of the personal allowance for someone born after 5 April 1948.

*3 Available to people born before 6 April 1935. Tax relief for this allowance is restricted to 10 per cent.

*4 This allowance is reduced when the individual’s income is above the income limit. This is at a rate of £1 for every £2 above the income limit until it reaches the minimum amount. Any reduction in the married couple’s allowance applies after any reduction to the individual’s personal allowance.

*5 This is also the maximum relief for maintenance payments where at least one of the parties is born before 6 April 1935.

*6 Available to spouses/ civil partners born after 5 April 1935. This allowance is 10% of the personal allowance for those born after 5 April 1938. It allows a spouse or civil partner who is not liable to income tax above the basic rate to transfer this amount of their personal allowance to their spouse/ civil partner. The recipient must not be liable to tax above the basic rate. The recipient is eligible to a tax reduction of 20% of the transferred amount.

National Insurance contribution thresholds

 

2014-15

2015-16

 

£ per week

£ per week

Weekly Lower Earnings Limit (LEL) (*1)

111

112

Weekly Primary Threshold (PT) (*1)

153

155

Weekly Secondary Threshold (ST) (*2)

153

156

Upper Earnings (UEL)

805

815

Upper Profits Limit (UPL)

41,865 per year

42,385 per year

Upper Secondary Threshold for U21’s (*3)

N/A

815

Small Earnings Exception (SEE)/Small Profits Threshold (SPT) (*1, *4)

5,885

5,965

Lower Profits Limit (LPL) (*1)

7,956 (per year)

8,060 (per year)

Employment Allowance

2,000 (per year, per employer)

2,000 (per year, per employer)

*1 These thresholds are uprated by CPI.

*2 The Weekly Secondary Threshold is uprated by RPI.

*3 Upper Secondary Threshold (UST) introduced from April 2015 for employees under the age of 21. The rate of secondary NICs for employees under the age of 21 on earnings between the ST and UST will be 0%.

*4 The Small Profits Threshold replaces the Small Earnings Exception from 6 April 2015.

Class 1 National Insurance contribution rates 2015-16

Employee (primary)

 

Employer (secondary)

 

Earnings (*1)

NIC rate (*2)

Earnings (*1)

NIC rate (*3 )

£ a week

per cent

£ a week

per cent

Below £112 (LEL)

0

Below £156 (ST)

0

£112 – £155 (PT) (*4)

0

Above £156 (ST)

13.8

£155 - £815 (UEL)

12

 

 

Above £815

2

 

 

 

*1 The limits are defined as LEL - lower earnings limit; PT - primary threshold; ST - secondary threshold; and UEL - upper earnings limit.

*2 The contracted-out rebate for primary contributions is 1.4 per cent of earnings between the LEL and upper accrual point (UAP) of £770 for contracted-out salary-related schemes (COSRS).

*3 The contracted-out rebate for secondary contributions is 3.4 per cent of earnings between the LEL and UAP for COSRS.

*4 No National Insurance contributions (NICs) are actually payable but a notional Class 1 NIC is deemed to have been paid in respect of earnings between LEL and PT to protect contributory benefit entitlement.

Self-employed National Insurance contribution rates 2015-16

Annual profits (*1) (£ a year)

Class 2 (*2) (£ a week)

Class 4 (per cent)

Below £5,965 (SPT) (*3)

0.00

0

£5,965 to £8,060 (LPL)

2.80

0

£8,060 to £42,385 (UPL)

2.80

9

Above £42,385

2.80

2

 

*1 The limits are defined as SPT - small profits threshold; LPL - lower profits limit and UPL - upper profits limit.

*2 Class 2 NICs are paid at a weekly flat rate of £2.80 by all self employed persons unless they have profits below the small profits threshold. The rate is uprated by CPI

*3 The self-employed may pay Class 2 contributions if their profits are below the SPT.

Further information: https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2015-16/tax-and-tax-credit-rates-and-thresholds-for-2015-16

 

Company Taxation Changes:

(for contractors operating through their own limited companies)

Profits from 1st April 2015 are taxable at a Corporation Tax Rate of 20%. For small owner managed businesses this remains unchanged.