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Summer budget 2015

What you need to know about the 2015 Summer Budget

From benefit reforms to a new living wage, we've summarised the big announcements from today's emergency Budget.

Following the election in May, the government today held an extra budget to outline new financial policies for this parliament.

Here's everything you need to know about the Summer Budget 2015 announcements which could affect you. 

If you receive benefits

The household benefits cap is to be reduced from £26,000 to £23,000 in London and  £20,000 outside London.

Working age benefits, including tax credits and Local Housing Allowance will be frozen for four years. This doesn’t include Maternity Allowance, maternity and paternity pay and sick pay.

When: Household benefit cap changes are TBC

If you plan to have three or more children

From 2017, any third or subsequent children born will not receive any benefits support. This means benefits such as Child Tax Credits and Universal Credit will only be paid for the first two children. There will be exceptions for multiple births, and existing families won’t be affected.

When: April 2017

If you have children currently under three years old

As previously announced, all parents of three and four year olds will receive 30 hours a week of free childcare from September 2017, up from the current 15. This will start in some areas in September 2016. Parents with children over three years old are also expected to look for work to get Universal Credit.

When: September 2017

If you want to leave your family home to your children

From 2017, a £100,000 allowance will be introduced that means you can leave your home to children and grandchildren tax-free when you die. This is per person and can be transferred to your partner when you die.

By 2020 it will have risen to £175,000. This means when added to the existing £325,000 individual allowance, a couple will be able to leave £1 million without paying inheritance tax by 2020.

When: From 2017

 

If you earn the minimum wage

A new national living wage of £7.20 per hour is being introduced from April 2016. It will be compulsory for employers to pay this to anyone aged over 25. It will rise to £9 an hour by 2020.

When: April 2016

If you earn over £10,600

The tax-free personal allowance (the amount most people earn before paying any income tax) is already set to rise to £10,800 from April next year. The chancellor announced that it will now rise to £11,000 in 2016, with plans to increase it to £12,500 by 2020.

A new law will be introduced that once it reaches this level, people working 30 hours a week on the National Minimum Wage won't pay Income Tax at all.

The threshold for 40% tax rate will also rise from the 2015/16 total of £42,385. It will be £43,000 in 2016/17.

When: April 2016

If you're a high earner 

Most people can contribute up to £40,000 a year into their pension tax-free at the moment. This tax-free amount will be reduced to £10,000 for individuals with incomes over £150,000. This amount tapers further the more you earn.

When: April 2016

If you're approaching retirement

The government is extending access to the Pension Wise service to those aged 50 and above, and is launching a marketing campaign to further raise awareness of the service. 

When: This is effective immediately

If you already have an annuity

Also plans to allow people to sell their annuity are being delayed until 2017. This follows the government’s consultation on the introduction of a secondary annuity market, where many respondents suggested the deadline for implementation was too short.  

When: 2017

If you work in the public services

Pay rises will be capped at 1% for the next four years.

If you’re hoping to go to university from 2016 

Student maintenance grants will disappear for new students starting in the 2016/17 academic year and will be replaced by a loans system. This will happen in England only. These will need to be repaid when you earn more than £21,000 per year. This loan repayment threshold will be frozen for five years.

Loans will also increase by £766 to £8,200 a year.

When: 2016-17 academic year

If you’re between 18 and 21 years old

Automatic housing benefit for under 18-21 year olds will be abolished.

The Chancellor is looking to commit to a ‘earn or learn’ initiative. So, those aged 18 to 21 who are on Universal Credit will have intensive training and support when they first claim. After six months they then will have to apply for an apprenticeship or traineeship, gain work-based skills, or go on a work placement.

When: April 2017

If you live in social housing

Rents for those in social housing will no longer be frozen, but will be reduced by 1% a year for 4 years.

Tenants on higher incomes in social housing (over £40,000 in London and over £30,000 outside London) will be required to pay higher rents, close to market rate, or near market rate.

When: TBC

If you’re a landlord  

Currently landlords can deduct their costs – including mortgage interest – from their profits before they pay tax.

Wealthier landlords can receive tax relief at 40% and 45%. This tax relief will be restricted for landlords to 20% (basic tax rate level).

When: April 2020

 

If you have a spare room  

If you rent out your spare room, you will be able to get up to £7,500 for it tax-free as part of the Rent a Room scheme. This has been frozen at £4,250 for 18 years.

When: April 2016

If you drive

No change to fuel duty (it's frozen for this year), but from 2017 Vehicle Excise Duty (VED) will be reformed. After the first year, most new cars will come with an average of £140 annual tax bill. Existing cars won’t be affected.

The deadline for the first MOTs on new cars and motorcycles will be extended to four years, subject to a public consultation.

When: 2017

If you have any insurance

You’ll see a slight increase in most insurance premiums as the Insurance Premium Tax will go up to from 6% 9.5%.

When: November 2015

If you receive any dividends

From next year, a new £5,000 tax-free allowance will be introduced for dividend income. This will replace the divident tax credit. Tax rates on divident income will be increased as a result. 

This system means only those with significant income will pay more tax. 

When: April 2016

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  • Lynn Matthews / 8 September 2015

    I have no idea why you believe an income of £21,000 means you're comfortable enough to no longer receive tax credits to pay for childcare and start paying off your student loans. Nonsensical world y'all live in.

  • leonard quy / 12 July 2015

    I can find nothing on the restriction to £1m of the life time allowance , or preserving the current limit of £1.25m why?

  • Ann Henry Smith / 12 July 2015

    Well it's time some of the excesses were reduced if we can't afford them. I remember my father saying the more you give the more they will expect and so it has happened. It would be good to be able to do it, but we all have to budget. As a pensioner I want to know when our pension will equal the minimum wage threashold per week.

  • tracey stock / 10 July 2015

    I think its all wrong he should do our job I'm a part time cleaner don't get no tax credit have to pay rent and couilal tax let him do my job for a year and I do his

  • Martin rice / 9 July 2015

    This is a take before you give budget.......

  • chris hubbard / 9 July 2015

    what is going to happen to savings & will we be allowance to save up to the first £1000 tax free

  • Devolved / 8 July 2015

    Does abolition of student grants apply to England only? And does it apply to higher education colleges as well as universities? Do the childcare changes only apply to working parents in England? What is devolved and what not?