The Chancellor of the Exchequer delivered his fifth coalition Autumn Statement to Parliament on Wednesday 3 December 2014, his last one before the 2015 General Election.
Although some of his proposed changes had already been announced the speech also contained some surprises, particularly the fundamental change to the way that stamp duties are now to be computed on property purchases, benefiting 98% of property buyers!
Here is our summary of the main changes, with a focus on small and medium sized enterprises (SMEs):
SMALL BUSINESS SUPPORT
- The Government is to provide a further £400 million to support venture capital for SMEs through the ‘Enterprise Capital Funds’ programme.
- The ‘Enterprise Funding Guarantee Scheme’ will facilitate a further £500 million of new funds for SMEs in 2015-16.
- The ‘Funding for Lending’ initiative to boost bank lending to firms is to be extended for a further year until 29 January 2016, with a focus on smaller businesses.
- The business rates support scheme is to be increased from £1,500 to £2,000 for 2015/16. This will help ‘high-street’ businesses to compete with on-line retailers. A comprehensive Government review of the current business rates system is to be carried out by the 2016 Budget.
- Employer National Insurance contributions (NIC) will be zero on earnings of most apprentices up to the age of 25 from April 2016. This is in addition to the exemption from employer NIC on employees under 21 due to be introduced from April 2015.
- The Research & Development tax relief scheme for SMEs is to be increased from 225% to 230% of qualifying revenue expenditure from 1 April 2015.
PERSONAL TAXES
- The tax-free personal allowance for 2015/16 is to be increased to £10,600 (an increase of £600 from the current £10,000).
- The higher rate threshold for 2015/16 is to be increased in line with inflation to £42,385. This is good news for higher rate taxpayers as it is the first increase for 5 years.
- From 6 April 2015 a 0% band of up to £5,000 will be available against savings income (but note is only available where a taxpayer’s non-savings income, such as employment income, business profits or rental income is less than £5,000).
- The basic, higher and additional rates of Income Tax for 2015-16 will remain at their 2014-15 levels.
- The Class 1 and Class 4 National Insurance upper earnings and upper profits limits for 2015-16 will increase in line with the Income Tax higher rate threshold.
BUSINESS TAXES
- From April 2015 the small profits rate will be unified with the main rate of corporation tax so there will be a single rate of 20% for all companies.
- From April 2015 the £2,000 National Insurance Employment Allowance is to be extended to households that employ care and support workers.
INDIVIDUAL SAVINGS ACCOUNTS (ISAs)
- The new £15,000 ISA limit introduced from July 2014 is to be increased to £15,240 from April 2015
- The Junior ISA and Child Trust Fund limits will both be increased to £4,080 from 2015-16.
- From 3 December 2014 the tax advantages of an ISA can be retained by a surviving spouse or civil partner following the death of a spouse or civil partner. Currently ISAs lose their tax-free status on the death of the account holder.
STAMP DUTY
- The method of calculating stamp duties is to be fundamentally changed from 4 December 2014 with the current system being abolished immediately.
- Stamp duty in future is to be calculated on a slice basis, much like income tax, with the following rates applying to the purchase price:
- 0% on the first £125,000
- 2% on the next £125,000
- 5% on the next £675,000
- 10% on the next £575,000
- 12% on any balance above £1.5 million
- As an example, stamp duty on a property purchased for £275,000 will fall from £8,250 under the old rules to £3,750 under the new rules, a saving of £4,500.
PENSION ANNUITIES
- From April 2015 a surviving spouse who continues to receive annuity income following their partner’s death under the age of 75, will be able to receive such income tax free.
- Individuals who purchase annuities from April 2015 will be allowed to select any beneficiary to inherit their pension when they die.
OTHER SIGNIFICANT ANNOUNCEMENTS
- Fuel duty to continue to be frozen.
- The student loan scheme is to be extended to post graduate students under 30 studying for a taught masters’ degree in any subject. The loans up to £10,000 will be available from 2016-17 at below commercial rates of interest.
- Agreement has been reached on the full devolution of business rates to the Welsh Government
