Budget 2014 summary at a glance
Business Tax
From 1st April 2014 the small companies’ rate of corporation tax will remain at 20% and the main corporation tax rate will be reduced to 21%, falling to 20% in April 2015.
The Annual Investment Allowance, for all qualifying expenditure on plant and machinery made between 1st April (5th April for income tax) 2014 and 31st December 2015, will increase from £250,000 to £500,000.
From 1st April 2014 the Research & Development tax credit payable to loss making small and medium sized companies will increase from 11% to 14.5%.
VAT
From 1st April 2014, the VAT registration and deregistration thresholds will be increased to £81,000 and £79,000 respectively.
National Insurance
From 6th April 2014 the employee’s National Insurance rate will remain at 12%, on earnings between £7,956 and £41,865, and the rate will remain at 2% on earnings above £41,865.
The employer’s rate will be 13.8% on all earnings above £7,956.
Self employed rates will be 9% on earnings between £7,956 and £41,865, and will be 2% on earnings above £41,865. Class 2 contributions will increase to £2.75 per week.
As previously announced, from April 2014 an allowance of £2,000 will be introduced to offset against employers’ Class 1 National Insurance.
From October 2015 a new scheme of Voluntary National Insurance Contributions (VNIC) will allow pensioners to top up their Additional State Pension. This will be available to everyone reaching the state pension age before 6th April 2016.
From April 2016 class 2 National Insurance will be collected via Self Assessment.
Income Tax
Tax bands for 2014/2015 are:
0% up to £10,000 (£10,500 and £10,660 for those born before 6th April 1948 and 6th April 1938 respectively).
20% on first £31,865 of taxable income
40% from £31,865 to £150,000 of taxable income
45% on excess taxable income
From 6th April 2015, the existing £2,880 10% savings tax rate will be extended to £5,000, but the tax rate will be reduced to nil.
The personal allowance will increase to £10,500 from 6th April 2015 and the basic rate limit will be reduced to £31,785.
As previously announced, from 6th April 2014 the exempt threshold for employment-related loans will increase from £5,000 to £10,000.
From 2015/2016 married couples and civil partners will be able to transfer 10% of the basic personal allowance between them, providing that neither party is a higher or additional tax payer.
The Tax-free Childcare Costs cap will be increased to £10,000 per year per child, therefore being worth up to £2,000 in tax relief, and from autumn 2015 will be available for children under the age of 12.
Consultation will take place to restrict the personal allowance to UK residents and those living overseas who have strong economic connections in the UK.
Capital Gains Tax
The capital gains tax exemption threshold will increase to £11,000 for 2014/2015.
As previously announced, the final period exemption for private residence relief will be reduced from 36 months to 18 months from 6th April 2014.
Stamp Duty
From 20th March 2014 the 15% stamp duty on the purchase of residential properties will be extended to properties over £500,000 (currently £2m), when purchased by a non-natural person, including companies. New bands will be introduced for the annual tax on enveloped dwellings (ATED); from 1st April 2015 for properties between £1m and £2m, and from 1st April 2016 for properties between £500,000 and £1m.
Other
From 1st October 2014 the Vehicle Excise Duty paper disc will no longer be issued.
Alcohol duty will be increased from 24th March 2014, resulting in a 6p rise on a bottle of wine, however beer duty will be reduced resulting in a 1p reduction on a pint of beer. Duty on spirits and ordinary cider will be frozen. Cigarettes will rise by approximately 24p per packet from 19th March 2014.
The Inheritance Tax (IHT) nil rate band of £325,000 is frozen until 2017/2018.
Adult National Minimum Wage will increase to £6.50 from October 2014.
Users of disclosed tax avoidance schemes will be required to pay any disputed tax upfront.
A new online system will be introduced to set up a payment plan for Self Assessment income tax for those in financial difficulty. However consultation will take place as to whether debtors who owe over £1,000 of tax or tax credits, will have the money recovered directly from their bank account.
Pensions
As previously announced, from 6th April 2014 the lifetime allowance will be reduced from £1.5 million to £1.25 million and the annual allowance will be reduced from £50,000 to £40,000.
From April 2015 people will be able to access their defined contribution pension schemes as they wish, at their marginal income tax rates rather than 55%.
Everyone who retires with a defined contribution pension will be offered free and impartial face-to-face guidance regarding their choices at retirement, from April 2015.
Savings
A new Individual Savings Account (NISA) will be introduced on 1st July 2014 and will have an annual investment limit of £15,000. At the same time the limit for Junior ISAs and Child Trust Funds will be raised from £3,720 to £4,000.
New National Savings & Investment bonds for those aged 65 and over will be available from January 2015.
A new Social Investment Tax Relief will give investors 30% income tax relief when investing into social enterprises from 6th April 2014.
The maximum monthly amount employees can contribute to Save As You Earn arrangements will increase from £250 to £500 per month from April 2014, and the Share Incentive Plan limits will increase to £3,600 per year for free shares or to £1,800 per year for partnership shares.
