Further to our live Twitter feed of the main announcements in the 2014 Budget. This newsletter looks in more depth at some of the key policy decisions that will impact individuals and businesses.
As previously announced, the Personal Allowance for the 2014-15 tax year will increase to £10,000. In the Budget, the Chancellor of the Exchequer set the Basic Rate Tax Threshold for the year at £31,865. Further, he announced that these limits for the 2015-16 tax year will be £10,500 and £31,785 respectively.
As a result, this means that the overall earnings amount before entering the Higher Rate Tax band is set to increase for the first time in this parliament.
The impact of this for an Owner/Director who is entitled to the full Personal Allowance, is paid an annual salary of £15,000 and has no other income, is to increase the amount available for the payment of Dividends without incurring personal tax from £23,805 in the current tax year to £24,178.50 in 2014-15 and £24,556.50 in 2015-16.
The Transferable Tax Allowance for married couples and civil partners will increase to £1,050 in the 2015-16 tax year where neither partner is a Higher or Additional Rate tax payer. This transferable amount will be set at 10% of the Personal Allowance in each tax year thereafter.
The change announced in the 2013 Budget to Employer provided Benefits in Kind relating to beneficial loans will come into force from April 2014. From then, the threshold for the small loans exemption limit will be increased from £5,000 to £10,000.
To encourage businesses to develop, the Annual Investment Allowance is set to increase to £500,000 for all qualifying investment in plant and machinery made on or after 1st April 2014 with this increased allowance running until 31st December 2015. This enables companies to claim the full cost of the expenditure against profits in the financial year of purchase.
In another step to encourage investment, the Seed Enterprise Investment Scheme (SEIS) is set to become permanent along with associated Capital Gains Tax reinvestment relief.
There have been modest steps in the Budget towards simplifying the tax system. The most tangible being that from April 2016, Class 2 National Insurance contributions for the self-employed will be collected through the Self-Assessment tax return rather than the current monthly or quarterly periodic payments.
In addition, the government has undertaken to consult of simplifying the rules on Employee Benefits and Expenses and the Construction Industry Scheme (CIS).
Whilst the pre-Budget rumours suggested that there may be a surprise in the realm of personal taxation, as it transpired it was the areas of Savings and Pensions that had the major reforms.
We will be issuing a Newsletter next week specifically on the Pension reforms and the impact of the proposed increased flexibility.
On Savings, the Individual Savings Accounts (ISA) has been dramatically simplified. Whereas up until now, there have been separate annual limits on the amounts to save in Cash ISAs and Share ISAs, from 1st July 2014 these will be merged into a single overall limit. Moreover, this limit will be increased to £15,000.
At the same time, the annual subscription limit for Child Trust Funds and Junior ISAs will be increased to £4,000.
The list of qualifying investments for ISAs will be extended to include peer-to-peer loans. In addition, the government will investigate further extending the list to include debt securities offered by crowdfunding platforms.
If you would like more detailed guidance on the impact of any of the Budget announcements, whether or not featured in this newsletter, or have a specific question, please contact firstname.lastname@example.org to arrange a consultation.