What were the key tax announcements in today’s Budget?

With the next Election looming in 2015, this was never going to be a controversial Budget and it wasn’t. There were a few decent giveaways for business owners but in the main it was very predictable. There is too much at stake for the Tory party currently.

As usual, Livewire will contain a more detailed interpretation of what the key announcements actually mean. Many of these are not highlighted during the Budget speech itself and appear some time after the Budget concludes, hidden in HMRC’s press releases. We will be scanning for surprises and will let you know of developments. But for now, here is a quick summary of the main announcements made.

General economic stats

Various figures were released all suggesting that the economy is in good form. Optimism for the future is running high with expectations for around 1.5 million new jobs to be created by 2019. Rather than repeat the stats, let’s just emphasise one key sound-bite. The Chancellor claimed that “the UK economy is now outperforming any other industrialised economy including Germany, Japan and the US.”

Overall, HMRC will be receiving more money to invest into anti-avoidance initiatives and catch those not paying their taxes. In addition, George Osborne confirmed that HMRC will be given new powers to collect what it regards as unpaid tax, directly from the offender’s bank accounts.

Personal taxes

To curb the practice of property ownership using a company wrapper to avoid paying stamp duty (SDLT), anyone who purchases a property over £500,000 as a company will be required to pay 15% SDLT. This will be effective from midnight on 19^th March and marks a significant drop from the current threshold of £2m introduced last Budget.

No inheritance tax will be payable by relatives of anyone in public office, i.e. armed forces, police, fire-fighters, who lose their lives during the course of duty.

Taxpayers wishing to build their own homes will be able to benefit from a “Right to Build” scheme, which pledges £150m worth of financial support. In addition smaller home building companies will be offered £0.5 billion worth of additional support to help them to increase their contribution to the construction industry in the UK. These are in addition to an extension to the existing Help to Buy schemes.

To encourage more saving, ISAs are to be simplified and merged to allow people to save up to £15,000 a year with no restriction to the investment in a cash ISA. The limit for Junior ISAs will be increased to £4,000, both commencing from July 2014. This is a good indicator of the likelihood that interest rates will increase in the medium term to offset the cost, which was already been hinted at by the Bank of England earlier this month.

The maximum value of Premium Bond investments will increase to £40,000 from June 2014 and rise to £50,000 in 2015.

From Autumn 2015, working parents with children under 12 will be eligible to 20% off the cost of childcare to the value of £10,000 each year.

The personal allowance for employees will increase to £10,500 from April 2015 and the 40% tax rate will commence at £41,865 from April 2014 and then rise to £42,285 from April 2015.

As unveiled in the Autumn Statement, married couples will be entitled to share £1,050 as a transferable tax allowance. We have already blogged about this and the negligible benefit it will have for taxpayers, beyond the extra publicity for the Government.

The planned rise to fuel duty will be scrapped and there is no rise in duty for whisky, other spirits or cider.  Beer duty will be reduced by 1p per pint to help support drinks manufacturers.

Effective from 2015, taxes to long haul flights will be reduced to the level charged for flights to the US, in a move to help UK exporters travelling to emerging economies for business purposes.

Numerous changes were announced to pensions, which primarily impact those due to retire shortly. These include the removal of the need to buy a pension annuity and simplification of other rules including a reduction to the restrictions pensioners face when they access their pension funds.

Business taxes

The level of funding available for UK exporters will increase to £3billion and interest rates to support business activities for exporters will be cut by a third to stimulate greater economic activity.

Collection of Class 2 NICs will be transferred to self-assessment to simplify the current system of taxes for the self-employed. This would mean that instead of paying throughout the year, as is currently the case, they would pay annually, along with the rest of their personal tax payment through the self-assessment tax return.

Retailers will receive a boost with £1,000 cut from business rates and other eligible employers will be able to claim the £2,000 Employment Allowance instead of seeing a reduction to their business rates. Read our earlier blog for further details on eligibility for the Employment Allowance, which comes into effect in April 2014.

We know already, but it was reaffirmed that in 2015 corporation tax at the larger company rate will be reduced to 20% and any NIC payable by employers of young people under 21 will be eliminated. In addition the Government has pledged to create 100,000 new apprenticeships including new ‘degree level’ equivalents.

Capital allowances (Annual Investment Allowance) will be increased to £500,000 until December 2015, which becomes effective from April 2014. This means almost any company can invest in new plant and machinery and write off 100% of the acquisition costs to the value of £500,000 in the year of purchase.

The SEIS initiative to support start-ups with access to tax efficient finance will become permanent.

R&D tax credits will continue with the additional benefit of the rate available to loss making smaller companies rising from 11 % to 14.5% from 2015.

And now for the more ‘quirky’ announcements

Owners of a private jet will have previously been benefiting from tax free travel, this is set to change from April 2014.

Money generated from fines paid by City companies and banks as a result of rate rigging and fraud will continue being donated to charities focused on the military and emergency services.

Betting sees a number of changes with tax on betting terminals increasing to 25%, offshore horse racing bookmakers to be taxed for the first time and a 50% cut to bingo duty.

If you have a pothole down your road, it could soon be a thing of the past as the Government has pledged £200m additional funding for councils to repair road damage caused by the extreme weather conditions this winter.

And finally, in case you hadn’t seen the pictures in all the papers, the UK is set to have a new £1 coin. The design has been modelled on the old ‘threepenny bit’ and will be introduced within the next 3 years in order to control forgery. This news was cleverly timed to coincide with today’s announcements, perhaps to help take away the heat from what was an otherwise a rather uneventful Budget 2014.

If you would like to discuss any of the budget announcements in more detail please contact Lesley Stalker by emailing las@rjp.co.uk