Posted by Simon Griffiths on 21 Mar 2014
The Spring Budget 2014
The Chancellor made his Budget Statement on 19 March 2014 and announced the following headline measures:
Personal Tax Changes in the Spring Budget 2014
The Personal Allowance which governs the amount of annual tax-free income that can be received by each individual will increase from £10,000 in the 2014/15 year to £10,500 in the 2015/16 year, and thereafter will be linked to the cost of living increases. Higher rate taxpayers also benefit from this as the rate at which the 40% rate begins will increase by 1% to £42,285.
The additional rate of Income Tax for those with an annual income of over £150,000 will remain at 45% for 2014/15 onwards.
From 6 April 2015, the starting rate for savings will reduce from 10% to nil and the starting rate limit for savings increases to £5,000. The result will be that those with a total income of less than £15,500 will not pay any tax on their savings.
From the 2015/16 tax year, a spouse or civil partner who is not liable to Income Tax or who is taxed at the basic rate (or dividend ordinary rate), will be able to elect on-line to transfer £1,050 (10%) of their Personal Allowance to their spouse or partner.
The Inheritance Tax (IHT) nil rate band remains at £325,000. However, funds held in foreign currency accounts in UK banks will be treated in a similar way to excluded property for the purposes of provisions which restrict how liabilities are deducted from the value of an estate for IHT.
The Income Tax and Capital Gains Tax (CGT) reliefs available for investors under the Seed Enterprise Investment Scheme (SEIS) will be made permanent, extending them beyond the current subscription deadline of 5 April 2017.
However, legislation will be introduced to prevent companies from benefiting from investment via the Enterprise Investment Scheme, SEIS, and Venture Capital Trust scheme, when they also benefit from Department of Energy & Climate Change Renewable Obligations Certificates (ROCs) or Renewable Heat Incentive (RHI) subsidies.
ISAs will be replaced by ‘New ISA’ (NISAs) from 1 July 2014; all existing ISAs will become NISAs. The annual subscription limit for 2014/15 will be increased to a single limit of £15,000 to be split between cash and stocks & shares without restriction. The range of securities which can be held within the NISA will also be extended.
The subscription limits for a child’s Junior ISA or Child Trust Fund will also be increased to £4,000.
Spring Budget 2014: Pension Changes
A big change to the flexibility of how it is possible to access pension funds was announced for introduction in 2015, allowing withdrawal of the pension pots from age 55. These withdrawals will be taxed at the taxpayer’s marginal Income Tax rate, rather than the current 55% tax charge. The 25% tax-free lump sum will still apply.
As there will no longer be a requirement to purchase an annuity the taxpayer will have greater control over when and how they access and invest their pension funds.
The Government is also intending to consult on ways to give equivalent treatment to both Qualifying Non-UK Pension Schemes (QNUPS) and the UK registered pension schemes, to ensure fairness and remove opportunities to avoid IHT.
Other pension changes will take effect from 27 March 2014:
- The minimum income threshold for accessing flexible drawdown reduces to £12,000 from £20,000.
- The capped drawdown limit will increase from 120% to 150% of an equivalent annuity.
- The amount of a trivial commutation lump sum will increase from £18,000 to £30,000. Those aged 60 and over with total pension savings of up to £30,000 will be able to take the pension as a lump sum(s). A trivial lump sum will not use up any of the lifetime allowances.
- The small pot limit will increase the size of a pension pot that can be taken as a lump sum to £10,000, regardless of total pension wealth, and will increase the number of such funds that can be taken as a lump sum from two to three.
Business/Company Tax Announcement
The main rate of Corporation Tax will reduce from 23% to 21% from 1 April 2014, and to 20% from 1 April 2015.
The VAT registration threshold has been increased by £2,000 to £81,000.
From 1 April 2014, the rate of Research & Development (R&D) payable tax credit rate will be increased from 11% to 14.5%, which will increase the cash credit for loss-making SMEs undertaking qualifying R&D.
A temporary increase in Annual Investment Allowance (AIA) to £500,000 was announced for expenditure in the period from 1 April 2014 for Corporation Tax and 6 April 2014 for Income Tax until 31 December 2015. Following this period AIA will reduce to £25,000.
From April 2016 The collection of Class 2 National Insurance Contributions (NICs) for the self-employed will be moved into the Self Assessment Tax Return process, which should reduce “red tape” for the self-employed.
Property Held by Trusts and Companies
The threshold from which the 15% Stamp Duty Land Tax (SDLT) charge will apply to non-natural persons such as companies and trusts that own property has reduced from £2m per property to £500,000 per property from 20 March 2014. The exemptions from this charge (for certain property rental and development businesses) remain unchanged.
Additionally, the Annual Tax On Enveloped Dwellings (ATED) will have two new bands introduced; from April 2015 for residential properties between £1m-£2m (at £7,000 per annum) and from April 2016 for residential properties valued at between £500,000-£1m (of £3,500 per annum). CGT will be chargeable at 28% on ATED-related gains on properties within these new bands.
The maximum monthly amount that an employee can contribute to a Save as You Earn (SAYE) Plan will increase from £250 to £500.
From 6 April 2015 employers will no longer be required to pay Class 1 secondary NICs on earnings paid up to the Upper Earnings Limit to any employee under the age of 21.
The targeted legislation is to be introduced to treat transfers of profits from one group company to another group company as not having taken place for tax purposes where the sole purpose of the transfer is to secure a tax advantage.
It is proposed that from 2015 HMRC will be allowed to recover tax and tax credits owed by taking the money directly from the debtor’s bank or building society account, including ISAs. It is proposed that this power will apply only to debts of more than £1,000 and that a minimum aggregate balance of £5,000 will be left untouched across all accounts.
Duty Changes Spring Budget 2014
In good news for beer drinkers, beer duty is being cut by 1p.
As widely predicted, the scheduled fuel duty increase for September 2014 is cancelled, freezing the duty for a fourth year.
Contact Tax Innovations about the Spring Budget Changes
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- Property Partnership Incorporation and SDLT
- Changes to the Taxation of QNUPS
- Inheritance Tax and QNUPS
- Non-Resident Landlords – UK Tax Update
- Overseas Pension Changes 6 April 2017