‘Budget 2014’

Budget 2014 – What was missing?

Wednesday, March 19th, 2014

Inheritance Tax threshold – no increase was announced. It will remain at £325,000 for the foreseeable future.

Stamp duty overhaul – given the significant jump from 1 to 3% duty on properties above £250,000 we were expecting to see a tiered system brought in but this was not to be.

Venture Capital Trusts/Enterprise Investment Scheme – we expected to see an increase in investment limits into these schemes but there were no changes..

Budget 2014 – Tax anti avoidance measures

Wednesday, March 19th, 2014

There barely goes a day when tax avoidance is not in the headlines. The government has given further powers to HMRC to continue to tackle this activity. Following a consultation which ended in February it was announced that tax payers entering into these schemes will have to pay the tax under dispute in accordance with normal payment dates. The lack of initial cash flow advantage will deter a substantial proportion of taxpayers from entering this type of arrangement in the first place.

In recent times we have also experienced an increased focus by HMRC on unpaid debts. HMRC have now been given further powers to collect debts of £1,000 and above direct from the taxpayers’ bank accounts including ISAs. The amount to be recovered will need to leave a minimum aggregate of all bank accounts balance of £5,000 after the debt is recovered. Whilst we appreciate this is huge problem for HMRC our experience with clients has been HMRC have been incorrect in the amounts they are trying to recover and the communication with the debt management side of HMRC is hugely problematic and frustrating leading potentially to undue tax being paid..

Budget 2014 – Corporate and business aspects

Wednesday, March 19th, 2014

Previous announcements on corporate taxes due to come into effect included;

  • Reduced main rate of corporation tax to 21% from April 2014 and 20% from April 2015
  • Small company rate to remain at 20% to give a unified rate from April 2015
  • Replacement of the associated company rules with simpler rules based on a 51% group membership once the unified rate is in place.

New announcements in this Budget included;

Capital Allowances

  • Annual Investment Allowance (AIA) – increase in the allowance to £500k from April 2014 and extended until 31 December 2015. The previous limit of £250k was due to expire on the 1 Jan 2015. Whilst we were expecting the period of the £250k limit to be extended the increase two fold of the limit was a welcomed surprise for businesses looking to invest in plant. In conjunction with new finance available for exporters this is a boost for the Midlands traditional manufacturing businesses.
  • Capital allowances in Enterprise zones to be extended by 3 years until 31 March 2020.
  • Enhanced capital allowances for zero emission goods vehicles will be extended to 31 March 2018.

Research & Development

The current payable tax credit for loss making SME companies has been extended from 11% to 14.5% from April 2014. Previously this has been reduced and is a huge boost for companies in the early stages of projects.

Property

The construction industry has been hard hit in the recession and although we are seeing signs of recovery in this sector, finance continues to be an issue. The Government is creating ‘Builders Finance Fund’ of £500m to enable developers to loan the funds required to continue with housing development which had previously come to a halt due to difficulty in assessing finance.

Limited Liability Partnerships

During the Autumn Statement it was announcement the major changes to take place with corporate partners involved in LLPs which enable a reduced rate of tax to be obtained. The new rules will take effect from April 2014.

 

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Budget 2014 – Personal tax, pensions and savings

Wednesday, March 19th, 2014

Below are the highlights from today’s Budget concerning personal tax, savings and pensions.

Personal Tax

–       Personal allowance will increase to £10,500 from April 2015.

–       Tax Rates – the HR threshold will be increased to £42,285 and the basic rate limit will be set at £31,785.

–       10% savings rate will be reduced to 0% and the band of savings income that is subject to the 0% rate will increase to £5,000. From April 2015. This means that anyone with total income of less than £15,500 per annum will no longer pay any tax on their savings income.

–       Transferable tax allowance for married couples and civil partners will increase to £1,050 in April 2015.

–       Simplifying the tax system; from April 2016 Class 2 NICs for the self-employed will be collected through SA

–       Self -service time to pay – The government will introduce a new online system to enable people in financial difficulty to set up a payment plan for self-assessed income tax.

Savings

–       The current ISA will be reformed into the new ISA (NISA), a simpler product with equal limits for cash and stocks and shares. The annual investment limit for the NISA will be £15,000 pa and will benefit more than 5 million people who currently reach their cash ISA limit, three-quarters of whom are basic rate taxpayers. The limits for the Junior ISAs and Child Trust Funds will increase to £4,000. These changes will be introduced from 1 July 2014.

–       Pensioner savings bonds: NS&I will launch a choice of fixed-rate, market-leading savings bonds for people aged 65 or over, available from January 2015. Interest on the bonds will be taxed in line with all other savings income at marginal rate.

–       It is expected that NS&I will launch a 1-year bond paying 2.8% gross and a 3-year bond paying 4.0% gross with an investment limit of £10,000 per bond.

Pensions

There will be more flexibility for people accessing their defined contribution pension savings when they retire.

–       Drawdown of pension income will be taxed at marginal income tax rates rather than the current rate of 55% for full withdrawals which means that an individual will be able to withdraw their savings at a time of their choosing subject to their marginal rate of income tax.

–       The tax-free pension lump sum will continue to be available.

–       Annuity purchase will no longer be obligatory.

–       From 27 March 2014 the amount the minimum income threshold for flexible drawdown is reduced to £12,000.

–       The capped drawdown limit will increase from 120% to 150% to allow more flexibility to those who would otherwise buy an annuity

–       The size of a single pension pot that can be taken as a lump sum, will be increased from £2,000 to £10,000 and there is an increase in the number of pension pots of below £10,000 that can be taken as a lump sum from 2 to 3.

–       The overall size of pension savings that can be taken as a lump sum,is increased from £18,000 to £30,000.

Budget 2014 – Economic overview

Wednesday, March 19th, 2014

The economic recovery is well underway according to the figures with GDP growth particularly strong. The government’s long term economic aim was to build a stronger, more competitive economy and the indications were that this is being achieved, albeit not painlessly.

Aided by the Office for Budget Responsibility, revised forecasts show the following:

  • Forecast for GDP growth in 2014 up to 2.7% (growth was 1.8% in 2013)
  • GDP to return to pre-crisis peak in 3rd quarter of 2014
  • Public sector net borrowing fell by half from its 2009/10 peak and a small surplus of 0.2% is forecast for 2018/19
  • Employment forecast to reach 31.4 million by 2018
  • Unemployment claimant count set to fall below 1 million in 2017 for the first time since 2008
  • Inflation set to remain at 2% target (Consumer Prices Inflation)

Much work is still to be done in reducing the deficit although today’s figures show that progress is being made in reversing the unprecedented rise in borrowing.

We welcome the measures to help boost investment, particularly the increase in Annual Investment Allowance to £500,000 although, with a couple of exceptions, felt that today’s Budget contained a lot of tinkering around the edges..

Budget 2014 – What we know already #2

Tuesday, March 18th, 2014

Abolition of Employers NI for Under 21s

Employers’ (Class 1 secondary) National Insurance contributions will be abolished for employees under the age of 21. This will be effective from 6 April 2015 and applies to earnings paid up to the Upper Earning Limit.

Employment Allowance

The Employment Allowance can be claimed from 6 April 2014 in a move which will see employers cut their NI bills by up to £2,000. The claims will be made through payroll software and it is hoped the move will stimulate further employment.

Corporation Tax

Due to fall from 23% to 21% from April 2014 and to align with the small companies rate of 20% from April 2015.

Transfer of Personal Allowance between spouses

In a nod to supporting marriage within the tax system, from April 2015, a spouse not liable to income tax or not liable beyond the basic rate is able to transfer up to £1,000 of personal tax allowance to his/her spouse or civil partner providing the recipient of the transfer is not liable to tax at the higher rate. This means that up to £200 in tax can be saved by effecting the transfer. Business leaders have suggested the maximum transfer be raised in line with the new allowance of £10,000 to have any real impact on a couples’ finances.

Extension of Help to Buy Scheme

The Help to Buy scheme was a surprise announcement at last year’s Budget with the measure designed to encourage first time buyers and those struggling to secure loans  onto and up the housing ladder.  There are two parts to the scheme; the first provides an interest free loan on new build properties and is open to first time buyers as well as existing homeowners. The second part of the scheme has proved to be more controversial, offering a taxpayer-backed loan on mortgages of up to 95% loan to value. It has been difficult to measure the impact of Help to Buy as increased movement in the housing market has coincided with the wider economic recovery. It was announced last weekend that the Help to Buy scheme would be extended by four years to 2020.

Pension relief

From April 2014, tax relief on pension contributions will be capped at £40,000 p.a. and lifetime pension savings capped at £1,250,000 with rumours circulating that lump sum drawdowns will become taxable.

Capital Gains Tax ‘Holiday’ to be halved

From April 2014, gains on the sale of a main residence will be exempt for up to 18 months after the owners have moved out. The current exemption period is 3 years.

Tax free childcare scheme

From September 2015 working parents can receive up to £2,000 per year per child on qualifying childcare costs. The scheme will include children of up to 12 years of age within a year of commencing.

Personal

From 6 April 2014, the personal tax allowance will rise to £10,000. There is speculation that this amount could increase further from April 2015 to £10,500. The higher rate threshold will rise to £41,865, representing a 1% increase. It will be interesting to see how Chancellor Osborne reacts to calls to increase this amount more in line with inflation as it is estimated that an additional 1 million taxpayers will be dragged into the 40% tax net.

Salaried partners will be taxed in line with employees for income and corporation tax, where certain conditions are met. There are also changes surrounding the allocation of profits within partnerships.

From 6 April, tax advantaged share schemes will be subject to self-certification with HMRC and the rules around this have been simplified.

We will be sending out our Budget highlights on the afternoon of the Budget. This will also be on our website.

If you would like to discuss anything surrounding Budget 2014, please contact Curo’s head of tax, Julia Whelan [email protected] or call Julia on 01527 558539..

Budget 2014 – What we know already

Wednesday, March 12th, 2014

Like businesses up and down the country (and beyond), we’re eagerly anticipating Chancellor Osborne’s Budget on 19 March and hoping that it contains measures to support and encourage continued growth throughout the economy. Here’s a reminder of some measures already announced:

Corporate

The main rate of corporation tax will fall to 21% in April 2014 before reducing further to 20% from April 2015 and in line with the small companies’ rate. This will help to simplify the compliance process as the rules identifying associated companies will cease to exist.

The rules governing the use of trading losses where there has been a change of ownership are to change and designed to ease current restrictions.

The Employment Allowance is introduced from 6 April 2014, reducing an employer’s National Insurance Contributions by up to £2,000 per annum.

Personal

From 6 April 2014, the personal tax allowance will rise to £10,000. There is speculation that this amount could increase further from April 2015 to £10,500. The higher rate threshold will rise to £41,865, representing a 1% increase. It will be interesting to see how Chancellor Osborne reacts to calls to increase this amount more in line with inflation as it is estimated that an additional 1 million taxpayers will be dragged into the 40% tax net.

Salaried partners will be taxed in line with employees for income and corporation tax, where certain conditions are met. There are also changes surrounding the allocation of profits within partnerships.

From 6 April, tax advantaged share schemes will be subject to self-certification with HMRC and the rules around this have been simplified.

We will be sending out our Budget highlights on the afternoon of the Budget. This will also be on our website.

If you would like to discuss anything surrounding Budget 2014, please contact Curo’s head of tax, Julia Whelan [email protected] or call Julia on 01527 558539..