The Chancellor announced that the personal allowance will be increased to £11,000 for 2016/17 and to £11,200 for 2017/18. The government plans to raise the allowance to £12,500 by the end of this parliament.
Personal Savings Allowance
From 6 April 2016 all bank and building society interest will be paid gross, without deduction of tax. The personal savings allowance will be introduced from this date and will apply for up to £1,000 of savings income (£500 for a higher rate taxpayer) resulting in a tax saving of £200.
The dividend tax credit will be abolished from 6 April 2016 and a new Dividend Tax Allowance of £5,000 will be introduced. Dividend income received in excess of the allowance will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers. This will significantly affect owner managed businesses who remunerate themselves through a combination of salary and dividends.
Individual Savings Accounts (ISAs)
In 2015/16 the overall ISA limit is £15,240. From 6 April 2016, ISA savers will be able to withdraw and replace money from their cash ISA without it counting towards their annual ISA subscription.
National Living Wage
From April 2016, all employees aged 24 or over will have to paid a national living wage (NLW) of £7.20 per hour. The national minimum wage will continue to apply to younger workers. The government hopes that the NLW will reach £9 per hour by 2020.
From April 2016, the income threshold for tax credits will reduce from £6,420 to £3,850 per year. Once claimants earn above the threshold, their award will be reduced at 48% (previously 41%) for each £1 claimed.
From April 2017, the child element of tax credits and universal credits will no longer be awarded for third and subsequent children.
The government is introducing a new extra allowance to be applied only to the value of a home left on death to a direct descendant of the deceased. The allowance will start at £100,000 per person from April 2017 and increase over four years to £175,000 per person, allowing a couple to eventually pass on a family home worth up to £1m (Includes the current inheritance allowance of £325,000 per person) with no tax payable.
Capital Gains Tax
No changes were announced in respect of capital gains tax rates or the annual exemption.