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2015’s second budget - Pre Budget predictions


Posted on 5 June 2015

2015’s second budget will soon be upon us – what are we likely to see in it?

George Osborne will make a second Budget speech on 8th July, which will be followed by a second Finance Act.  With election pledges in mind we take a look at what it might include:

No increases in mainstream tax rates

David Cameron pledged during the election that a new law would be introduced to guarantee no increases in VAT, National Insurance and Income Tax for 5 years.

Inheritance Tax

The long promised rise in the threshold for Inheritance Tax is eagerly anticipated, but what form will it take?

The current nil rate band (or tax free amount) of £325,000 was increased from £312,000 in 2009 and has not moved since.  It is possible for a spouse or civil partner to pass on their nil rate band on death (or the unused proportion of it) and therefore the limit per couple is currently £650,000.

With many noting that property values have increased significantly over the years the Conservatives talked about taking the family home out of inheritance tax in their recent election manifesto rather than resurrecting a past, broader, pledge to simply raise the threshold to £1M.

A Treasury paper circulated prior to the election talked of introducing a new transferrable nil rate band of £175,000 in addition to the current one (£325,000). However, there are some strings attached:

  • The relief would only be available to spouses so singles and unmarried couples would miss out.
  • Only the main home would qualify – this seems similar to the capital gains tax exemption for main residences, but will there be an election available where the family has more than one home?
  • The additional relief would only apply to transfers to children.  Transfers to other relatives including grandchildren would not qualify.  This would appear to be at odds with the general principal that a person should be free to leave his or her estate to whomever they wish - and would be of no assistance to childless couples.
  • The relief will not apply to lifetime gifts.  Will discourage elderly couples from downsizing and passing some wealth on during their lifetimes?
  • Estates worth over £2M will begin to see the relief watered down until is it completely withdrawn.


It seems likely that the lifetime allowance for pensions will reduce again from £1.25M to £1M.  There may also be provisions to restrict the annual tax relief available for those earning over £150,000.

Capital allowances

The annual investment allowance for purchases of plant and machinery is currently set at £500,000.  As of 31 December this is to reduce to just £25,000.  The Chancellor has indicated that he will look at setting a more generous rate in his Autumn Statement, but this would not take place until much later in the year.  Perhaps he will take the opportunity on 8th July to provide some reassurance to businesses that they will continue to be supported when investing in plant and machinery to facilitate growth.


Will the promise to increase the period over which profits can be averaged from 2 years to 5 years be forthcoming in July?

Avoidance and simplification

The Conservatives have promised to raise more revenue from tackling tax avoidance and it seems likely that changes to legislation will continue in this area.  They also suggested that the Office of Tax Simplification who have been responsible for various suggestions to changes to the tax system in recent years (for example on employee benefits and the taxation of trusts) should be put on a permanent footing and have its remit expanded.

We will be watching the speech and reading the Treasury papers with much interest in just a few weeks time!

If you'd like to discuss any aspects of the budget, or for any tax advice get in touch with our Tax Team here

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