Welcome to the 18th March Budget 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.
We are committed to ensuring all our clients don’t pay a penny more in tax than is necessary. Please contact us for advice on your own specific circumstances. We’re here to help!
Table Of Contents
- Budget Summary
- National insurance
- Corporation tax
- Tax administration
The sweeteners for voters include; a cut in duty on beer, cider and spirits, including whisky. The tax on road fuel is frozen, but the tax and NI charges for having the private use of a company car or van are set to increase above the levels which had already been predicted.
There are two changes to entrepreneurs’ relief which take effect immediately, but those should not affect people who are selling significant stakes in their businesses.
For the future the Chancellor promised to increase the tax-free personal allowance up to £11,000 and introduce a new tax-free savings allowance of £1,000, but not until April 2016 at the earliest. Class 2 NIC is set to be combined with Class 4 NIC, which will be a simplification for the self-employed.
The promised abolition of annual tax returns to be replaced by an online tax account may sound attractive, but HMRC’s track-record of mixing up figures submitted under RTI does not bode well for such an ambitious project.
We have organised the coverage below into future promises, which can only happen after the General Election, and immediate changes which take effect from 18 March 2015, or from April 2015.
This newsletter is a summary of the key tax points from the Budget, based on the documents released on 18 March 2015. It is possible that a different position will be shown by the draft legislation which is due to be published on 24 March 2015. We will keep you informed of any significant developments.
Personal allowances – Immediate changes
|Born after 5 April 1948||£10,000||£10,600|
|Born after 5 April 1938 before 4 April 1948||£10,500||£10,600|
|Marriage allowance (also for civil partners) born after 5 April 1935||–||£1,060|
|Savings rate: 0%||0 – £5,000||TBA|
|Basic rate: 20%||0 – £31,900||0 – £32,300|
|Higher rate: 40%||£31,901- £150,000||£32,301- £150,000|
|Additional rate: 45%||Over £150,000||Over £150,000|
ISA Savings – Immediate changes
|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|
ISA Savings – Future Promises
The Government will consult on changes that will allow investors to withdraw money from their ISA and replace it within a tax year, without that replacement money counting towards their annual ISA investment limit.
Another idea is to help first time buyers save for a deposit to buy their first home. From late 2015 savers who do not own their own home will be able to open special “help to buy ISA”. For each £200 they save the Government will contribute into the ISA a further £50, up to a maximum of £3000. The help to buy ISA can be kept open for up to four years and can be used to buy a home for the saver to live in (not let out) that costs up to £450,000 in London or up to £250,000 outside London.
A third change to the tax on savings will be to exempt from tax the first £1,000 of bank and building society interest for basic rate taxpayers each year. Higher rate taxpayers will be eligible to receive £500 of tax free bank interest per year. Additional rate taxpayers will not benefit from this savings allowance. This allowance will apply in addition to tax free savings in ISAs from 6 April 2016.
Pensions – Immediate Changes
The lifetime allowance, which governs how much can be sheltered from tax within a taxpayer’s pension funds, is set at £1.25 million for 2014/15. This allowance is not changed for 2015/16.
Pensions – Future Promises
From 6 April 2016 it is proposed that people who have already purchased pension annuities will be able to cash-in those annuities when they choose.
Inheritance tax – Immediate changes
Inheritance tax – Future promises
The Government will review the use of deeds of variation for inheritance tax avoidance purposes. This does not mean anything will change. There have been reviews of the use of deeds of variation before and nothing has happened.
CGT on homes
From 6 April 2015 any gain made on the disposal of a UK residential property will be taxable in the UK, whether or not the owner is resident in the UK. Non-resident owners will only be taxable on the amount of the gain that accrued from 6 April 2015 onwards, and will pay tax at the same rates as they would if a UK resident: 18% or 28% for individuals or 20% for companies. A non-resident individual will be eligible to claim a tax exemption for their main home in the UK if they spend at least 90 midnights in that home in the UK during the tax year. Spending in excess of 90 days in the UK could make the individual tax-resident in the UK for the tax year in question.
Entrepreneurs’ relief – Immediate changes
Until now the law has not specified what percentage of the company or partnership the person must dispose of in order to get ER on the associated disposal of another business asset. From 18 March 2015 the individual will have to sell (or give away) at least 5% of the company’s shares or at least a 5% interest in the partnership for an associated disposal of a business asset to qualify for ER.
This change should not affect people who are planning to sell their whole company or partnership, or a significant stake (over 5%) in that business.
One of the conditions for achieving ER on the sale of a company’s shares is that the company must be a trading company or the holding company of a trading group. From 18 March 2015 there is a minor change to the definition of what counts as a trading group: the activities of joint venture companies are excluded. This is designed to catch artificial arrangements where the shareholder holds their interest in the business mostly through a joint venture and not directly in the trading company.
Wasting assets – Immediate changes
The law is to be changed to ensure that the item must be used in the owner’s trade to qualify for this potential tax exemption, and not lent briefly to another person in order to attract the tax exemption.
Landlords – Immediate changes
Capital allowances – Immediate changes
Farmers – Future promises
Capital allowances – Future promises
Businesses can benefit from 100% tax deduction in the year of purchase for the cost of capital items which are covered by the Annual Investment Allowance (AIA). This allowance has an annual limit per business or group of companies of £500,000, but is set to reduce to £25,000 on 1 January 2016. The Government will review the level of the AIA during the Autumn statement in 2015, and expects to keep the AIA limit at a “generous level”.
NI – Immediate changes
|Class||Weekly or annual earnings||Rates|
|Employer’s class 1 above primary threshold||Above £156pw||13.8%|
|Employer’s class 1 for employees aged under 21||£156 to £815pw||0%|
|Employee’s class 1 not contracted out||From £155 to £815pw||12%|
|Employee’s additional class 1||Above £815pw||2%|
|Married woman’s rate*||From £155 to £815pw||5.85%|
|Self-employed class 2 (per week) above||Above £5,965pa||£2.80|
|Share fishermen class 2 (per week)||–||£3.45|
|Volunteer development workers class 2||–||£5.60|
|Class 3 ( per week)||–||£14.10|
|Self-employed class 4||From £8,060 to £42,385pa||9%|
|Self-employed class 4 additional rate||Above £42,385pa||2%|
*only available for women who made a valid married woman’s election before 11 May 1977.
NI – Future changes
Class 2 and class 4
The Government will consult on combining these two classes of national insurance which are both paid by the self-employed. Currently paying class 4 NIC does not allow the payer to qualify for any state benefits, such as the state pension or maternity allowance. It is likely that the contributory attribute of class 2 will be carried into the reformed class 4 NIC.
Corporation tax rates – Immediate changes
Corporate Losses – Immediate changes
Diverted profits tax – Immediate changes
Exclusions are also introduced for companies operating in the oil and gas industries.
Children’s TV tax relief – Immediate changes
High-end TV tax relief – Immediate changes
Film tax relief – Immediate changes
Orchestra relief – Future changes
VAT – Immediate changes
|From:||1 April 2015||1 April 2014|
|Acquisitions from EU member
states, registration and
Tax returns – Future promises
This is a very ambitious target, in view of the problems experienced by employers with incorrect PAYE accounts populated by figures returned under RTI. However, if the digital tax accounts can be completed with accurate figures from other sources it could save a lot of automatic penalties for filing late tax returns.