Overview

This Finance Bill proposes various changes to UK tax laws, including adjustments to income tax rates, inheritance tax thresholds, corporation tax rates, and excise duties. It also introduces new measures for banking companies and improves tax compliance and enforcement.

Description

Tax Locks

The bill includes a "tax lock" preventing the basic rate of income tax from exceeding 20%, the higher rate from exceeding 40%, and the additional rate from exceeding 45% until the next general election. Similarly, the standard VAT rate will not exceed 20%, and the reduced rate will not exceed 5% during the same period.

Income Tax Changes

The personal allowance for income tax will be increased to £11,000 in 2016-17 and £11,200 in 2017-18. The basic rate limit will also be increased to £32,000 in 2016-17 and £32,400 in 2017-18. Changes are made to the taxation of pension lump sum death benefits, with some now taxed as pension income.

Corporation Tax Changes

The main rate of corporation tax will be 19% for financial years 2017-2019 and 18% for 2020. The annual investment allowance will increase to £200,000.

Inheritance Tax Changes

The nil-rate band for inheritance tax will be increased by a "residential nil-rate band" for those inheriting a home from descendants. This additional allowance will increase over time, reaching £175,000 in 2020-21. Further amendments are made to the calculation of inheritance tax on settled property, exemptions for heritage property, and interest on unpaid tax.

Banking Changes

The bill includes provisions for reducing bank levy rates and introducing a surcharge on banking companies. It also restricts deductions for expenses relating to customer compensation payments and provides definitions relating to banks.

Other Tax Changes

Amendments are made to excise duties (vehicle excise duty), insurance premium tax (increased to 9.5%), aggregates levy (restoration of exemptions), and climate change levy (removal of exemption for renewable energy electricity).

Administration and Enforcement

The bill aims to improve tax compliance through international agreements and client notification obligations. It introduces a scheme for enforcing tax debts by deducting amounts from accounts held with deposit-takers, and modifies the interest rate applicable to judgment debts in taxation matters.

Government Spending

The bill's impact on government spending is complex and depends on the overall economic effects of the changes. Specific figures are not explicitly provided in the text.

Groups Affected

This bill affects a wide range of groups:

• Taxpayers: Income tax and VAT changes affect all taxpayers, with higher-income earners potentially impacted differently by pension allowance changes.
• Businesses: Corporation tax changes affect companies. Specific provisions relating to residential property businesses, loan relationships, and derivative contracts impact particular sectors.
• Heirs: Inheritance tax changes affect those inheriting property and large estates.
• Banks and Financial Institutions: Bank levy and surcharge changes directly impact these entities.
• Local Authorities and their Members: Changes to travel expense rules affect these groups.
• Deposit-takers: The debt enforcement scheme directly involves deposit-takers.
• Investors in EIS and VCT schemes: Changes to eligibility criteria for these tax relief schemes.

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