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Budget 2014 Summary

The Chancellor delivered his fifth budget statement on Wednesday 19 March 2014, his penultimate spring budget before the next General Election scheduled for May 2015.

The Chancellor announced that it was to be a budget for ‘makers, doers and savers’ and one which underpins the building of a ‘resilient economy’.

There was certainly good news for savers with the launch of a new ISA (NISA) from July 2014 and also for businesses with the doubling of the Annual Investment Allowance to £500,000 from April 2014. 

Major and far reaching changes were announced to the rules on pensions which will provide individuals with greater flexibility in accessing defined contribution pension savings.

The Chancellor announced that the Government will shortly take forward a Wales Bill that will devolve new tax and borrowing powers to Wales.

Here are the Key Highlights (note some of these changes have been announced previously):

Personal Tax

  • The tax-free personal allowance is to be increased to £10,000 from 2014/15 (up from the current £9,440).

  • The personal allowance is to be increased by a further £500 to £10,500 from April 2015.

  • The basic rate band for 2014/15 is to be reduced to £31,865. This means that higher rate tax is not payable until an individual’s gross income exceeds £41,865.

  • The current 10% starting rate on savings income is to be reduced to 0% from 2015/16 with the band increased to £5,000. Note the 0% rate is not available if taxable non-savings income exceeds £5,000. 

  • An additional one million taxpayers are now paying higher rate income tax compared to when the coalition government came to power four years ago.

  • A new married couples’ tax allowance is to be introduced from the 2015/16 tax year. This will allow a transfer of up to £1,050 of allowances from a non-taxpaying spouse / civil partner saving up to £210pa for the taxpaying spouse / civil partner. The transfer is only available where neither spouse is a higher rate taxpayer.

Personal investments

  • From July 2014 a new streamlined ISA (called a NISA) is being introduced with an overall limit of £15,000 pa.

  • The rule which restricts 50% of the annual limit to cash investments to be abolished and the restriction on the transfer of funds between shares and cash ISAs is to be removed.

  • From July 2014 the annual limit for Junior ISAs and Child Trust Funds is to be increased from £3,840 to £4,000.

  • The cap on Premium Bonds is to be increased from £30,000 to £40,000 from 1 June 2014 with a further increase to £50,000 from 1 June 2015.

  • A new ‘pensioners’ bond’ for the over 65s is to be introduced from January 2015 with an overall limit of £10,000. The bond will pay a favourable interest rate although the interest will be liable to income tax.

  • The original investment time limit for the Seed Enterprise Investment Scheme (SEIS) is to be removed from 2014/15 so that the scheme reliefs become permanent.

National Insurance Contributions

  • The collection of Class 2 NIC payable by the self-employed is to simplified from 2016 by using the Self Assessment system.

  • For 2014/15 the primary NIC threshold for employees will rise to £7,956 with the upper limit increasing to £41,865.

  • A new NIC employment allowance available to all businesses is being introduced from 6 April 2014 which will exempt the first £2,000 of employer NIC contributions. Full details of this can be accessed at: http://www.marshvision.com/NIC-Employment-Allowance.asp

  • Further details of a new scheme of Voluntary National Insurance contributions have been announced to allow pensioners to top up their Additional State Pension. The scheme will operate for 18 months from October 2015.

Business Tax

  • The current £250,000 Annual Investment Allowance available on certain qualifying capital expenditure is to be doubled to £500,000pa between 1 April 2014 and 31 December 2015.

  • The main rate of corporation tax is to be reduced to 21% from April 2014 and 20% from April 2015, thereby aligning it with the current small companies rate.

  • The Research & Development credit for loss making SMEs is to be increased to 14.5% from 11% for qualifying expenditure incurred from 1 April 2014.

Capital Gains Tax

  • The capital gains tax annual exemption is to be increased from £10,900 to £11,000 for 2014/15 and £11,100 for 2015/16.

  • From 6 April 2014 the private residence exemption which currently applies to the last 36 months of ownership is to be reduced to 18 months. 

Inheritance Tax

  • The inheritance tax nil rate band currently frozen at £325,000 is to be extended until the 2017/18 tax year.

Value Added Tax

  • The VAT turnover threshold registration limit is to be increased to £81,000 from 1 April 2014.

  • The deregistration limit is to be increased to £79,000 from 1 April 2014.

Stamp Duty Land Tax 

  • The threshold relating to residential properties acquired by companies is to be reduced to £500,000 from £2 million from 20 March 2014. The special rate of stamp duty on such acquisitions remains at 15%.

Full details of tax rates & allowances applicable to the 2014/15 tax year are available on our free app which can be downloaded here

To discuss in detail how the Chancellor’s Budget Statement will affect your own tax position or for general personal and business tax advice then please email us at: contact@marshvision.com or call us today on 01633 215 544