The Chancellor has delivered the Government’s Budget for the coming year. Please find below a summary of the main points and tax rates for 2014/2015
Direct Recovery of Tax Debts
Measures will be included in Finance Act 2015 to empower HMRC to recover tax debts of £1,000 or more directly from the bank accounts of taxpayers who have the financial ability to pay and who have been contacted multiple times by HMRC in respect of the outstanding amounts. The power will be subject to rigorous safeguards.
The Government previously announced a new scheme to be introduced from Autumn 2015 to allow working families to claim 20% of yearly childcare costs. The costs on which the support can be claimed have been increased to £10,000 a year for each child.
Class 2 NICs
From April 2016, Class 2 NICs for the self-employed will be collected via self-assessment.
ISAs and Savings
From 1 July 2014, Individual Savings Accounts (ISAs) will become ‘New ISAs’ (NISAs). The annual subscription limit will be increased to £15,000. The current rule whereby only half the overall annual limit can go into a cash ISA will be abolished. Investors will be permitted to transfer their investments from a stocks and shares account to a cash account.
The annual amount that can be invested in a Junior ISA or Child Trust Fund account is to be increased to £4,000 from 1 July 2014
From 6 April 2015, the maximum amount of an eligible individual’s savings income that can qualify for the starting rate of tax for savings will be increased to £5,000, and this starting rate will be reduced from 10% to nil. This only applies if the individuals non-savings income is below this limit.
From 24 March 2014, alcohol duty on a typical pint of beer will be reduced by 1p per pint. Duties on spirits and other drinks exceeding 22% alcohol by volume, and most cider duties, will be frozen.
Income Tax and National Insurance
The Personal allowance will rise to £10,500 from 6 April 2015, (£10,000 from 6 April 2014)
Allowances for 2014/2015 are as follows:
Personal allowance (born after 5 April 1948): £10,000
Personal allowance (born between 6 April 1938 and 5 April 1948): £10,500
Personal allowance (born before 6 April 1938): £10,660
Minimum married couples allowance*: £3,140
Maximum married couples allowance*: £8,165
Blind person's allowance: £2,230
Income limit for allowances for age related allowances: £27,000
Income limit for standard allowances: £100,000
* given where one partner was born before 6/4/1935, as 10% reduction in tax due
Income Tax Bands and Rates
The income tax bands for 2014/15 are:
Savings rate* (10%) - 0 to £2,880
Basic rate (20%) - 0 to £31,865
Higher rate (40%) - £31,866 to £150,000
Additional rate (45%) - over £150,000
*The savings rate of 10% only applies if the individual's net non-savings income does not exceed the savings rate limit.
National Insurance rates 2014/15
For 2013/14 the main rates and thresholds for NI contributions are:
Lower Earnings Limit (LEL) for Class 1 NICs - £111/week
Employer's class 1 above £153/week not contracted out - 13.8%
Employee's class 1 not contracted out from £153 to £805/week - 12%
Employee's additional class 1 above £805/week - 2%
Self-employed small earnings exemption - £5,885 per annum
Self-employed class 4 from £7,956 to £41,865 per annum - 9%
Self-employed class 4 additional rate above £41,865 per annum - 2%
Self-employed class 2 - £2.75 per week
Voluntary contributions class 3 - £13.90 per week
As announced in the 2013 Budget, a new employers NI allowance will come into effect from 5 April 2014, where up to £2,000 can be offset against the cost of employers class 1 NI contributions. This will offer businesses a reduction in the cost of employing workers. This will be available for all businesses, not just new employees taken on by new businesses. This can be offset using payroll software through the usual RTI process.
As previously announced, the main rate of corporation tax will be reduced to 20% from 1st April 2015, bringing it in line with the small companies rate. This will remove the need for the associated companies rule and the marginal rate of corporation tax.
The small companies rate is already 20%. The main rate will be 21% from 1 April 2014, and then 20% from 1 April 2015.
The rates and thresholds of the main capital allowances will apply as follows for 2014/15:
Main pool: writing down allowance: 18%
Special rate pool: writing down allowance: 8%
Annual Investment Allowance (AIA) cap: £500,000: 100% on qualifying expenditure. The AIA has been doubled to £500,000 from 1 April 2014 and is due to be reduced from 1 January 2016 to £25,000
Capital Gains Tax
The thresholds for capital gains tax (CGT) have increased slightly for 2014/15:
Annual exemption: £11,000 (2013/14: £10,900)
Annual exemption for most trustees and personal representatives: £5,500 (2013/14: £5,450)
Rate for gains within the basic rate band: 18% (no change)
Rate for gains above the basic rate band: 28% (no change)
Rate for gains subject to entrepreneurs' relief: 10% (no change)
The VAT rates remain unchanged at...
Lower rate: 0%
Reduced rate: 5%
Standard rate: 20%
The registration limit from 1 April 2014 is
Annual turnover: £81,000 (1 April 2013 - £79,000)