Welcome to the 2014 Autumn Statement edition of Tax Tips & News.
In this analysis we have mainly concentrated on the tax measures that will directly affect individuals, employers and small businesses.
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Table Of Contents
- Autumn Statement 2014 Summary
- Property Taxes
- Business Taxes
- Tax Favoured Investments
- Capital Taxes
Autumn Statement 2014 Summary
Small businesses should be pleased with the £1,500 business rate discount for small high street shops, cafes, pubs and restaurants. All employers will benefit from the zero rate of employers’ national insurance for workers aged under 21, which is to be extended to apprentices aged under 25 from April 2016.
People employing carers in their own homes will qualify for the employment allowance with up to £2,000 per year. Where an ISA is passed on to the surviving spouse or civil partner on death, the tax shelter for the savings will be preserved.
Further detail on all these points is given below. This newsletter is based on the documents released on 3 December 2014. It is possible that a different position will be shown by the draft legislation which will be published on 10 December 2014. We will keep you informed of any significant developments.
Stamp Duty Land Tax
From 4 December 2014 the new rates and bands of SDLT apply (see below) and the tax is imposed in a progressive fashion such that each slice of the property value bears tax at the rate according to that band, like income tax. These changes only apply for residential properties, not for commercial properties.
Until 3 December 2014 a house which sold for £260,000 would attract SDLT at 3% on the entire value, so the purchaser would pay £7,800 (£260,000 x 3%), although SDLT for properties costing up to £250,000 was just 1%.
Where the contract for the same house at the same price completes on or after 4 December 2014 the SDLT will be calculated as:
- £250,000 – £125,000 x 2% = £2,500
- £260,000 – £250,000 x 5% = £ 500
- Total = £3,000
This saves the purchaser £4,800.
Buyers who have already exchanged contracts to purchase, but have not completed the transaction before 4 December 2014 will pay SDLT at the new rates and bands which are:
|Purchase price (£)||Rate of SDLT on each band (%)|
|Up to 125,000||0|
|Above 125,000 and up to 250,000||2|
|Above 250,000 and up to 925,000||5|
|Above 925,000 and up to 1,500,000||10|
The changes for SDLT will mean that purchasers of residential properties costing less than £937,500 will pay less tax, but purchasers of properties over that threshold will pay more tax, and for purchasers of properties costing over £2.1 million will pay considerably more.
Land and Building Transaction Tax
|Purchase price||LBTT rate|
|Up to £135,000||0%|
|£135,001 to £250,000||2%|
|£250,001 to £1m||10%|
|Purchase price||LBTT rate|
|Up to £150,000||0%|
|£150,001 to £350,000||3%|
Annual Tax on Enveloped Dwellings
This tax was introduced in April 2013 and has raised five times more than expected, so the Chancellor is putting up the annual charges to apply in 2015/16 as follows:
|Up to £1,000,000||£Nil||£Nil|
|£1,000,001 to £2,000,000||£Nil||£7,000|
|£2,000,001 to £5,000,000||£15,400||£23,350|
|£5,000,001 to £10,000,00||£35,900||£54,450|
|£10,000,001 to £20,000,000||£71,850||£109,050|
High street shops, pubs, restaurants and cafes with a rateable value of less than £50,000 currently qualify for a discount on business rates of £1,000 per year. This discount will be increased to £1,500 per year for 2015/16.
Drivers of very low-emission cars may be in for a shock from 6 April 2015. Those vehicles with CO2 emissions from zero (i.e. electric) to 50g/km will be subject to tax as a benefit in kind for the first time. Tax will be payable on 5% of the vehicle’s list price, or 8% for diesel cars. The benefit in kind chargeable amount for all other cars will increase by 2% of the list price, including those cars which are currently taxed on 35% of the list price, as the maximum benefit rises to 37% of the list price.
Where a company car driver receives free fuel (petrol, diesel or LPG) for private journeys, the taxable benefit is calculated as the percentage of the list price for the car applied to the fuel charge multiplier set at £22,100 for 2015/16 (£21,700 for 2014/15) . The maximum taxable benefit of receiving free road fuel for private use will increase to £8,177 for 2015/16 from £7,595 for 2014/15.
Where the employer pays for the electricity to charge an electric company car there is no tax on the benefit of using that electricity on private journeys. Equally there is no standard rate to reimburse employees when they use their own domestic electricity supply to charge an electric company car.
Driving from home to work in a company van is not considered to be a private journey, but it is when the vehicle is a company car.
When a company van is used for private journeys the driver is taxed on £3,090 for 2014/15. This increases to £3,150 for 2015/16. When road fuel is provided for private journeys in a company van the taxable benefit is £581 for 2014/15, rising to £594 for 2015/16.
An electric van is currently tax-free for the driver, even when it is used for private journeys. However, from 6 April 2015 the private use of an electric commercial vehicle will be a taxable benefit, calculated as £630 for 2015/16. The taxable benefit for electric vans will increase each year until it is equal to other vans from April 2020.
However, large companies must pay their corporation tax by quarterly instalments once their taxable profits exceed £10 million, and the tax due is at least £10,000. From 1 April 2015 those thresholds are divided by the number of companies in the corporate group which are related by a 51% holding.
The Chancellor has proposed the Northern Ireland Executive could take control of corporation tax rates, and directly collect corporation tax from companies based in that region. There is no indication of when this change may occur.
A new tax relief along the same lines for companies that produce children’s TV programmes will be introduced from April 2015. It will also consult on introducing a new tax relief for orchestras from April 2016.
Research and Development
Companies have been able to claim enhanced tax relief for expenditure on research and development (R&D) for many years. The amount spent on specific classes of costs relating to qualifying R&D projects is multiplied by a percentage, before the total is deducted from the company’s taxable income for the year. Since 1 April 2012 that percentage has been 225%.
For R&D expenditure incurred from 1 April 2015 that percentage is increased to 230%. However, the costs that qualify for this deduction will be further defined to remove materials which are used in products that are sold.
Large companies claim R&D tax relief as an expenditure credit equal to a percentage of the R&D spend for the accounting period. That credit (known as “above the line” credit) is generally set against the company’s corporation tax liability for the year. The percentage of R&D costs translated into the “above the line” credit was 10% for periods since 1 April 2012, and will be increased to 11% from 1 April 2015.
Income Tax Allowances
Those tax changes would not apply where the pensioner had already bought an annuity with his pension fund, leaving the surviving spouse worse off. From 6 April 2015 where the pensioner dies before age 75 and had purchased a joint life annuity or guaranteed term annuity to provide for the spouse, further payments from the annuity made after the death of the pensioner will be tax free.
To take advantage of the remittance basis the non-domiciled person must elect to do so, and pay an annual charge which varies according to how long they have been living in the UK:
- 7 out of last 9 tax years: £30,000
- 12 out of last 14 tax years: £50,000 to be increased to £60,000
- 17 out of last 20 tax years: £90,000 (new charge)
Tax Favoured Investments
|2014/15 (limits from 1 July 2014)||2015/16|
|Shares and cash ISA||£15,000||£15,240|
|Junior ISA and Child Trust Fund||£4,000||£4,080|
The maximum investment each social enterprise organisation can receive is limited to about £283,000 for each three year investment period. The Government is to seek EU approval to increase this limit to £5 million per year, up to £15 million for each investment period.
Gains on UK Dwellings
People who are not tax-resident in the UK do not pay UK capital gains tax when they sell a property in the UK, although the gain may well be taxed in the country where the individual is tax-resident.
From 2015/16 non-resident owners of UK homes (dwellings) will have to pay UK capital gains tax on the gain that arises on the sale of their home for periods from 6 April 2015 onwards. However, the non-resident individual can elect for their UK home to be treated as free from capital gains tax, if they spend at least 90 midnights in that home in the UK during the tax year. Those 90 days may be spread over several properties if they own several homes in the UK. Spending 90 days in the UK could make the individual tax-resident in the UK for the tax year in question.
This 90 day rule will also apply to UK residents who own a second home outside of the UK. Currently the owner can elect for an overseas home to be treated as free of capital gains tax. From 6 April 2015, an overseas property will only be eligible to be free of UK capital gains tax if the owner spends at least 90 midnights there during the tax year, or is treated as being tax resident in the country where the property is situated. It is possible to be tax resident in more than one country concurrently.