Finance Bill 2015-16 to 2016-17 — Second Reading — 11 Apr 2016 at 22:51

The majority of MPs voted to increase the personal income tax allowance, change the way dividends are taxed, cut capital gains tax, and to reduce the amount which can be taken out of a pension tax-free from £1.25m to £1m.

MPs were considering the Finance Bill^[1], the Bill was the primary means by which the announcements in the March 2016 budget^[2] became law.

The Bill:

• Left the income tax rates for 2016-17 unchanged^[3] at as follows; basic rate: 20%; higher rate: 40% and additional rate: 45%.
• Increased the threshold for starting to pay higher rate tax from £32,400 to £33,500 as of 2017-18.
• Increased the income tax personal allowance for 2017-18 to £11,500 (For 2016-17 it was set at £11,000).
• Introduced a a personal savings allowance from 6 April 2016 to remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers.
• Changed the way dividend income is taxed, abolishing the Dividend Tax Credit from April 2016 and introducing a new Dividends Allowance of £5,000 a year. Rates of tax on dividend income above the allowance were set at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
• Reduced the pensions "Lifetime Allowance", the amount that can be drawn from a pension scheme without triggering additional tax, from £1.25 million to £1 million, effective from April 2016.
• Left fuel duties unchanged.
• Left duties on beer, spirits and most ciders unchanged.
• Increased duty rates on all tobacco products by 2% above RPI inflation.
• Introduced a new soft drinks industry levy
• Left the VAT rates unchanged.
• Reduced the higher rate of capital gains tax from 28% to 20% and the basic rate from 18% to 10%
• Reduced the planned corporation tax rate for 2020-2021 by 1% to 17%
• Made no overarching changes to inheritance tax but introduced a number of changes to its implementation.

A "soft drinks industry levy" was included in the Budget, but is due to be implemented in the 2017 Finance Bill, not this Bill.

The majority of MPs supported the motion:

• That the Bill be now read a Second time.

The passing of this motion enabled the Bill to continue on its path to becoming law.

• [1] Parliament's webpage on the 2015-16 to 2016-17 Finance Bill
• [2] Budget 2016: documents on the Gov.UK website
• [3] Income Tax rates and allowances: current and past, HM Revenue and Customs

Debate in Parliament |