The Chancellor’s 5th budget on the 19 March2014 contained good news for savers on ISA’s and pensions, with increased allowances for capital expenditure for business but also proposed expansion of HMRC collection powers.

2014 Budget proposals will become law on receipt of the Royal Assent -expected in July 2014.

Income Tax rates and allowances

The following changes were announced

	2014/2015	2015/2016
*Personal allowance -born after 5.4.1948	£10,000	£10,500
Personal allowance- born between 6.4.1938 and 5.4.1948	£10,500	Unchanged
Personal allowance –born before 6 April 1938	£10,660	Unchanged
Married couples transferrable allowance (only if transferee is a basic rate taxpayer)	N/a	Up to £1,050
Tax rates bands	Gross income limits	Gross income limits
NEW –Savings only rate- 0%	N/A	Up to £5,000 savings
Basic rate-20%	Up to £31,865	Up to £31,785
Higher rate -40%	£31,866 to £150,000	£31,786 to £150,000
Additional rate -45%	£150,000+	£150,000+

*The removal of the personal allowance for those whose gross income exceeds £100,000 remains unchanged

 

Adult (N)ISA and child trust (N)ISA’s

	2013/2014	2014/2015
Adult ISA/NISA	Up to £11,520	From 1.7.2014 up to £15,000
Maximum of 1cash NISA & 1 Stocks/shares NISA Per year
Savers- 16-18 years		From 1.7.2014 up to £15,000 in cash NISA only
Child Trust accounts/Junior ISAs	Up to £3,720	From 1.7.2014 up to £4,000

Capital Gains tax

• No change in tax rates of 10%, 18% or 28% .Increased annual 2015/2016 exemption limits to £11,000 (2014/2015) &£11,100 (2015/2016) for individuals

Inheritance tax

• No change to 40% rate or exemptions but proposed exemptions for service personal that die as a result of their duties.

 

Companies and unincorporated business

	2013/2014	2014/2015
*R & D Tax credits refund rate for small & medium businesses	11%	14.5%
*Annual Investment allowance	£250,000	Up to £500,000 until 31.12.2015. £25,000 from 1.1.2016

*For companies rate change effective from 1.4.2014

*For unincorporated business rate change effective from 6.4.2014

VAT-effective from 1 April 2014

• VAT registration taxable turnover threshold limit has increased from £79,000 to £81,000

• VAT deregistration taxable turnover threshold limit has increased from £77,000 to £79,000

 

National insurance contributions

• Class 1, Class 1A and Class 1B rates are unchanged

• From 6 April 2014 Class2 weekly rate increased from £2.70 to £2.75. Exemption limit increased from £5,725 to £5,885.

• Any class 2 liabilities unpaid for earlier tax years where self-employment has now ceased, to be collected via PAYE coding notices

• From 6 April 2016 Class 2 contributions will no longer be collected via direct debit but will be included in taxpayers’final Self–Assessment liability together with income tax and Class 4 National insurance.

• Class 3 voluntary weekly contributions rate increased from £13.55 to £13.90

• Class 4 Contributions –lower profit limit increased to £7,956 from £7,755

-9% rate applies on profits between £7,956 and £41,865

-2% rates applies on profits over £41,865

Corporation tax

Main Corporation tax rate from 1 April 2014 reduced from 23% to 21% for companies with profits exceeding £1,500,000.

Corporation tax rate for small companies with profits up to £300,000 remains unchanged at 20%.

From 1 April 2015 rate for all companies will be unified to a single rate of 20%

Employers and employees

 

• Inflationary increases in taxation rates for company cars, van and provision of private fuel costs to employees.

 

• Increases in annual value of shares awarded and savings limits for authorised Share Incentive Plans (£3,000to £3,600) and SAYE schemes (£250 to £500 per month) from 6 April 2014.

Pension changes

All tax restrictions on pensioners’ access to their pension pots to be removed ending the compulsoryrequirement to use funds to buy an annuity.

Tax rate on taxable part of pension pot taken as cash on retirement, decreased from 55% to 20%

Increase in total pension savings which can be taken as a lump sum to £30,000

Tax collection proposal

2014 Budget -Accelerated collection of disputed tax-In outstanding tax cases involving HMRC enquiries or open appeals into tax reductions arrangements registered under DOTAS or in violation of the General Anti Avoidance Rule ( GAAR), taxpayers be required to pay the disputed tax upfront before any legal ruling has been made on the validity of the scheme under enquiry. Penalties will apply to late payments.

Direct recovery of debts –2015 Budget proposal for HMRC to recover tax and overpaid tax credits debts exceeding £1,000 directly from taxpayers’ bank accounts (subject to various safeguards).

This article is based on current legislation and practice and is for guidance only. Specific professional advice should be taken before acting on matters mentioned here.   Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene LLP. He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk