Overview

This Finance Bill introduces various changes to UK tax laws, including adjustments to income tax rates, inheritance tax thresholds, corporation tax rates, and excise duties. It also includes measures related to banking levies, tax administration, and enforcement.

Description

The bill covers a wide range of tax adjustments. Key changes include:

• Tax Locks: Income tax rates (basic, higher, and additional) and Value Added Tax (VAT) rates (standard and reduced) will be locked at their current levels until the next general election.
• Income Tax: Increases to the personal allowance and basic rate limit are proposed.
• Inheritance Tax: A new "residence nil-rate band" is introduced to increase the inheritance tax-free allowance for homes passed to direct descendants. This allowance will increase annually.
• Corporation Tax: The main rate of corporation tax will be reduced to 19% for 2017-2019 and 18% for 2020.
• Capital Allowances: The annual investment allowance is increased to £200,000.
• Banking Levy: Rates for the bank levy are reduced annually from 2016 to 2021.
• Banking Surcharge: A new 8% surcharge is introduced on the profits of banking companies, subject to an allowance.
• Pensions: Changes are made to the taxation of lump sum death benefits from pension schemes and to the annual allowance.
• Other Taxes: Changes are made to Vehicle Excise Duty (VED) rates, Insurance Premium Tax (IPT) is increased, and exemptions to the Aggregates Levy are restored.
• Tax Administration and Enforcement: New powers are introduced for international cooperation on tax compliance, including client notification, and for enforcing tax debts by deduction from bank accounts. Changes to interest rates on tax-related judgment debts are also included.
• Carried Interest: Carried interest (profit from investment funds) will be taxed as capital gains, with provisions for avoiding double taxation.
• Disguised Investment Management Fees: Measures to prevent tax avoidance through disguised investment management fees are introduced.

Government Spending

The bill's impact on government spending is complex and depends on various economic factors. While some tax cuts are included (e.g., corporation tax reduction), the overall effect may be an increase in revenue due to the new banking surcharge and other measures aimed at tackling tax avoidance.

Groups Affected

• Individuals: Changes to income tax rates, personal allowances, inheritance tax, and pension rules will directly impact individuals' tax liabilities.
• Businesses: Corporation tax, capital allowances, and banking levies will affect businesses' tax obligations.
• Banks and Financial Institutions: The banking levy and the banking surcharge will significantly affect the profitability of banks and financial institutions.
• Pensioners: Changes to pension taxation rules will affect how death benefits are taxed.
• High-income earners: The tapered reduction of the annual allowance for pensions particularly impacts high-income individuals.
• Heirs inheriting property: Changes to inheritance tax rules particularly affect those inheriting homes.
• Tax Advisers: New client notification obligations for tax advisers are included.
• Deposit-takers: New obligations and liabilities are imposed on deposit-takers related to tax debt enforcement.

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