Main points from the 2014 budget

Posted on by Samantha Nicholson

Savings

  • From 6 April 2014 the overall ISA savings limit will be increased to £11,880 of which £5,940 can be invested in cash.
  • From 1 July 2014 ISAs will be reformed into a simpler product, ‘NISA’ and all existing ISAs will become NISAs.
  • From 6 April 2015 the current 10% tax rate will be reduced to nil and tax on savings income will be increased to £5,000.
  • The Overall annual subscription limited for NISAs will be increased to £15,000 from 1 July 2015 for 2014/15 and investments cannot exceed £15,000 in total.
  • The annual subscription limit for junior ISA and CTF accounts will increase to £3,840 from 6 April 2014 and from 1 July 2014 the amount that can be subscribed for 2014/15 will also be increased to £4,000.
  • You will also be able to subscribe the full amount to a cash account (currently only 50% can be saved in cash)

Personal Tax

  • For those born after 5 April 1948 the personal allowance will increase from £9,440 to £10,000 for 2014/15 and to £10,500 for 2015/16.
  • The reduction in the Personal Allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction is £1 for every £2 of income above £100,000, so for 2014/15 this allowance ceased when adjusted net income exceeds £120,000.
  • The basic rate of tax still remains at 20% and will be reduced to £31,865 (for 2014/15 and £31,765 for 2015/16) from which the higher rate of 40% is applied up to an including £150,000. The additional rate tax of 45% is payable on taxable income above £150,001.
  • Dividend income is taxed at 10% where it falls within the basic rate band, 32.5% where dividends is at the higher rate of tax and where income exceeds £150,001, dividends will be taxed at 37.5%.
  • From April 2015 married couples and civil partners may be eligible for a new transferable tax allowance, this will enable spouses and civil partners to transfer a fixed amount of their personal allowance to their spouse or civil partner, The transfer allowance is £1,050 for 2015/16 (being 10% of the personal allowance). The option will be available to couples where neither pays taxes at the higher or additional rate, the claim will be made online and couple will be entitled to the full benefits in their first year of marriage.
  • Seed Enterprise Investment Scheme (SEIS) was introduced in 2012 as a way of encouraging equity investment in small companies. This relief was originally introduced for a period of five years and has now been made permanent in respect of both income and capital gains tax relief applicable.
  • From 6 April 2014 the government is planning on introducing a new tax relief of 30% for individual investing in equity or certain debt investments in social enterprises. The tax relief available is to be similar design to the SEIS. Organisation which are charities, Community Interest Companies or Community benefit societies will be eligible. Draft guidance is expected to be published later this month.

Business Tax

  • The main rate of corporation tax will be reduced from 23% to 21% from 1 April 2014 and reduced again to 20% from 1 April 2015, in line with the small profit rate.
  • The small profits rate will therefore remain at 20% until then.
  • The maximum amount of Annual Investment Allowance was increased from £15,000 to £150,000 from 1 January 2013 to 31 December 2014 and is further increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. The Annual Investment Allowance will return to £15,000 after this date.
  • The qualifying period for the Capital Allowance in Enterprise zones is proposed to be extended to 31 March 2020. Subject to certain conditions being met.

Employment Tax

  • From 6 April 2014 the scale of chargers for working out the taxable benefit for an employee who has use of an employer provided car, the bands used to work out the taxable benefits remains the same but the percentage applied by each bands is to go up by 1% with an overriding maximum charge of 35% or the list price of the car. From 6 April 2015 the percentage applied by each band is to go up by 2% and the maximum charge is to increase to 37%.
  • From 6 April 2014 the government has introduced an allowance of up to £2,000 per year for many employers (read more on this here: https://nicholsonandco.co.uk/employment-allowance/)
  • From April 2015 the government will abolish employers NIC for those under the age of 21, but will not apply to those earning more than the upper earning limit, which is £42,285 per annum for 2015/16. Employer NIC will be liable as normal beyond this limit.
  • Three new tax relief have been introduced to help encourage and promote indirect employee ownership:
    • From 6 April 2014 disposals of shares that result in a controlling interest in a company being held by an employee ownership trust will be relived from Capital Gains Tax.
    • Transfers of shares and other assets to employee ownership trusts will be exempt from inheritance tax providing certain conditions are met.
    • From 1 October 2014 bonus payments made to employees of indirectly employee owned companies which are controlled by an employee ownership trust will be exempt from income tax up to a cap of £3,600 per annum.
  • In-year penalties for Real Time Information (RTI) are to be rolled out from October 2104 to encourage companies with the information and payment obligations, The late filing penalties will apply to each PAYE scheme, with the size of the penalty been based on the number of employees in the scheme. It is proposed that monthly penalties of between £100 and £400. Each scheme will be subject to only one late filling penalty each month regardless of the number of returns submitted late in the month, there will be one un-penalised default each year with all subsequent defaults attracting a penalty.
  • Class 2 National Insurance flat rate increase to £2.75 per week.
  • The small earning exception is £5,885 per year.
  • Class 3 (voluntary) National Insurance flat rate increased to £13.90 per week.
  • Class 4 (Self Employed) remains at 9% on profits between £7,956 to £41,865 and 2% on profits over £41,865.
  • Mileage allowance remains the same for 2014/15:
    • Cars and Vans up to 10,000 miles – 45p
    • Over 10,000 miles – 25p
    • Bicycles – 20p
    • Motorcycles – 24p
  • Statutory Sick Payt increases to £87.55 per week
  • Statutory Maternity Pay remains at 90% of weekly earnings for first 6 weeks and increases to £138.18 per week from week 6 for 33 weeks.
  • Statutory Paternity Pay increases to £138.18 for two weeks.
  • Statutory Adoption Pay increases to £138.18 for 39 weeks.

Capital Tax

  • Capital Gains Tax remains the same at 18% for any income taxed at the basic rate band and 28% thereafter.
  • Entrepreneur’s relief remains at 10% with a lifetime limit of £10 million for each individual.
  • Capital Gains Tax annual exemption is to be increased to £11,000 for 2014/15.
  • The Inheritance Tax nil rate band remains frozen at £325,000 until 5 April 2018.

This is meant as guidance only. No responsibility for loss occurred by any persons acting/refraining from action as a result of this information can be accepted by the Nicholson & Co (Sheffield) Ltd. It is always advisable to seek advice first.