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Emergency budget 2015

 

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It is characteristic for the first budget of a new government to be tough, and the announcements today made this budget no exception.  In the first conservative only budget since 1996, "Britain still spends too much, borrows too much" Mr Osborne stated.  Through a range of measures, the chancellor set our proposals designed to reduce welfare spending by £35 billion and gain tax revenues of' £47 billion by 2020.

 

National minimum wage hike

 

The minimum wage, which is currently £6.50 an hour for over 21s, is set to increase.  For workers aged over 25 the wage will rise to £7.20 from April 2016 and in stages to £9 per hour by 2020. For Under 25s the minimum way will be set by the Low Pay Commission.  The minimum wage is intended to partly offset the cut in working tax credit for those on the lowest income.

 

Personal allowance to rise

 

The income at which a person starts to pay tax, or the personal allowance, is set to increase from its current level of £10,600 to £11,000 from April 2016.  When Mr. Osborne took office as chancellor in 2010/11 the allowance was £6,475, and it has increased every year since.

 

The allowance is set to further increase to £12,500 by 2020, in keeping with the Conservative election promise.  The previous intention was to raise the allowance to £10,800 in 2016/17 and £11,000 by 2016/17 and therefor this announcement brings forward the tax relief.

 

Basic rate tax threshold up

 

In April 2016, the income level at which a person starts to pay tax at 40 percent will also go up, from £42,385 to £43,000.  Due to previous cuts this threshold is still lower than where it stood at £43,875 in 2010/11.  The election promise is to raise the threshold to £50,000 by 2020/21.

 

Tax credits fall

 

Tax credits are a government payment for people on low incomes. Where the household income is low, a working person can be eligible for working tax credit.  A household is eligible for child tax credit where income is low and it has children to support.

 

Child tax credits, and universal credits, will only be paid for the first two children.  This will take effect for children born after April 2017.

 

Tax credit will start to reduce when families are earning just £3,850.  This is a steep cut from the existing threshold of £6,420.

 

Benefits cut

 

The cap on housing benefits that a person can receive will be set at £20,000 outside London, and £23,000 for Londoners.  This is reduction from the current level of £26,000.  Housing benefit will no longer be available to the under 25s.

 

The TV license will be free for over 75s.

 

Currently students from a family with a household income of less than £25,000 can apply for a grant.  However from the 2016/17 academic year, university grants will no longer be available, although loans available to students will increase.  All benefits for people of working age are to be frozen for the next four years.

 

People on incomes of over £30,000 outside the capital, or £40,000 in London will have to pay the market rate for rent in social housing.

 

Child care

 

From 2016, for working parents with three and four year olds, free, state childcare will be provided for up to 30 hours a week.  This is an increase in the current 15 hour a week provision.


The child care fund, which was due to be introduced from September this year will now be delayed until September 2017.

 

Inheritance tax rising to £1 million

 

From April 2017, the government will reduce inheritance tax via a family home allowance.  The rate will be phased in over four years, in 2019/20 reaching £175,000 per person.  The current nil rate band is £325,000 per person and therefore £650,000 per married couple.  An individual can therefore pass on their home to their children or grandchildren and the first £500,000 will be free of inheritance tax.  For a married couple, the allowance is effectively increased to £1 million on the family home.


The family home allowance will be gradually tapered for estates valued at more than £2 million.  The additional family home allowance will be withdrawn at a rate of £1 for every £2 that the estate exceeds £2 million.

 

The nil rate band has not changed since 6 April 2009.  With rises in property prices since 2009 this had led to a greater number of families exposed to inheritance tax.  The rate of £325,000 is expected to stay fixed until 2021.

 

In order to keep the tax liability as low as possible the £325,000 allowance should be allocated firstly to assets in the estate which are not the family home.  For instance, an individual passing on a home worth £175,000 and other assets worth £325,000 will pay no inheritance tax under the new rules.  By comparison, an individual passing on £500,000 of assets none of which qualify for the family home allowance would pay tax at 40% on £175,000 of the estate, or £70,000.

 

A nuance of the rule will allow an individual or couple to keep an ‘inheritance tax credit’ if they downsize.  This credit is designed so that the rules do not discourage grandparents from passing on a property which could more suitably accommodate the larger family of their children.

 

Non-domiciled status phased out

 

Under the current system a UK resident can be domiciled elsewhere.  Domicile is usually determined by the place in which a person is born.  From April 2017, a person who has been living in the UK for 15 years out of the last 20 years will no longer keep their non-domiciled status.  The ruling mainly benefits the most wealthy of foreign born residents, who can pay a ‘remittance basis charge’ to reduce liability to UK tax.  A person will no longer be able to choose to be non-domiciled if person born in the UK to UK domiciled parents.

 

 The non-domcilied rules will also apply for inheritance tax purposes.  A person who is not UK domiciled will no longer be able to exclude UK assets from liability to UK inheritance tax.

 

Bank levy changes

 

The current bank levy, introduced in 2011, is based on the balance sheets of banks.  The rate of this levy will be reduced over the next six years.  The levy will be replaced by an additional 8 per cent tax on the bank’s profits from UK earnings.

 

Drop in corporation tax

 

The rate of corporation tax, currently 20%, will be cut to 19% in 2017 and to 18% in 2020.  The main rate of corporation tax was 28% when the conserve rates came to power as a coalition in 2010/11, and has gradually reduced since then.

 

Employers’ annual allowance

 

Under current rules, the first £2,000 of employers’ national insurance that an employer would otherwise have to pay is exempted by an employment allowance.  From next year, the allowance will increase to £3,000 from 2016.  A business could employ four employees on the minimum wage without having to pay national insurance.

 

A director of his or her own limited company will no longer be able to benefit from the employment allowance.

 

The annual allowance

 

The annual investment allowance will stay at £200,000 from January 2016.  The allowance enables the deduction of capital expenditure (such as on computer equipment) from taxable profits in the same period in which the expenditure is incurred.

 

Tax relief on pensions to be lowered

 

Pension contributions are a tax efficient method of saving for retirement.  Employee pension contributions are deducted from taxable pay and employer contributions are deducted from company profits (and are not treated as taxable income for the employee.)  The most which can be contributed to a pension is the amount of earnings, although this is capped at £40,000.  This cap is due to gradually tapering from £40,000 to £10,000 for people with incomes of over £150,000. The tapering will be introduced from April next year.

 

The lifetime allowance is the total value of the pension fund which will be free from tax.  Currently the allowance is £1.25 million.  However this is set to be reduced to £1 million, also from April 2016.

 

A consultation will also begin as to whether pensions should be treated like ISAs. Pension contributions will instead be made from after tax pay. However, pension income will not be subject to tax.

 

Tax deduction restricted for interest paid for rental property

 

A landlord is able to deduct the cost of providing accommodation from rental profits.  The largest type of expense is usually interest on mortgage used to finance the property.

However, the chancellor announced that the tax relief on interest payments will be restricted to basic rate only.  The current basic rate of tax 20%.  This will raise the tax liability of landlords who are also higher rate taxpayers.  The measure will be brought in gradually over four years starting in April 2017.

 

Landlords will no longer be able to claim the wear and tear allowance.  Currently landlords can deduct 10% of rents received from taxable profits if the property is let furnished.  From 2016/17 only the actual costs incurred on furniture can be deducted from profits.

 

Mr Osborne maintained to be addressing an unfairness in the current system which allows tax relief on interest for landlords but not for homeowners.  The forthcoming restrictions on landlords is likely to cool house price inflation.

 

There is no indication that the restriction on interest relief would apply to companies.  This may increase the appeal of a moving a property to a company as a method for saving tax.  However the change to the taxation of dividends, explained below, could also eliminate the tax saved through company ownership.

 

Rent-a-room-relief

 

A live–in landlord has two options for calculating taxable profits.  The first is to deduct a proportion of expenses, say based on floor area occupied by their lodger.  The second is to deduct a flat rate from their rent in calculating taxable income.  The rent-a-room scheme has been at the same level of £4,250 since 1997.  It is due to increase to £7,500 from April 2016.

 

Dividend tax credit abolished

 

The tax credit on dividends will be replaced from April 2016 with a £5,000 tax free dividend allowance.  As a consequence many investors who pay tax at a higher rate and shareholders of their own companies could face a higher tax liability.

 

Under the current system, a credit is given for dividends which are paid out of after tax profits. Therefore, there is no tax to pay on dividends for basic rate taxpayers, the rate is effectively 25% for higher rate taxpayers and 30.5% for those with income over £150,000.  Following the proposal, the first £5,000 of dividend income will be tax free. Thereafter basic rate taxpayers will pay 7.5%, higher rate taxpayers 32.5% and additional tax payers 38.1%.

 

Tax relief for amortisation to be abolished

 

Tax relief will no longer be available for goodwill on company acquisitions.  Until now a company has been able to deduct the cost of buying a business from its company profits.  The cost is usually spread out over a number of years, depending on the useful economic life of the business which has been acquired.  The deduction from yearly, tax-adjusted profits, known as amortisation, was at least 4% a year.  However for acquisitions made on or after 8 July 2015, this tax relief will be abolished.  In view of the forthcoming changes, a share purchase (rather than an assets purchase) may be a more beneficial for a company considering an acquisition.

South London accountants

 

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From shop fronted premises in East Dulwich, we offer a convenient and accessible method for people to visit us from nearby areas.

 

Transport links

 

The main office in Dulwich can be accessed via train with an average journey time of twelve minutes to London Bridge and via various bus routes, the P13, 40, 197, 185 and 12, 37, 363 and 63.  Buses towards central London mainly to go via Demark Hill and Elephant and Castle. Nearby Peckham Rye runs trains to London Bridge, Victoria and Blackfriars.  A short bus ride away is Forest Hill which is part of the new East London tube line.  Car parking is free outside the office.

 

International business

 

Our specialism in UK tax, and extensive experience on the practicalities of dealing with HMRC, gives us the ability to advise and assist people from anywhere in the world.

 

Through our IT system it is possible to view and sign key documents via an online portal.  This keeps our service available regardless of our visitor’s whereabouts.
For clients that come via referral, or where it is not convenient to reach our office, an initial meeting by telephone or Skype is practical alternative.  Our initial meeting is free.

 

Local clientele

 

By appointment, we can be reached easily for a face to face meeting.  Consequently, we are accountants and tax advisers in Dulwich, but also the surrounding areas of Sydenham, Camberwell, Forest Hill, Herne Hill, Peckham, Honor Oak and West Dulwich. By postcode, our business is concentrated in the areas of SE21, SE22, SE15, SE26, SE23 and SE24.

 

Areas of specialism

 

Our clients typically include:

 

 

We would be please to assist with your query. Please contact us to arrange an initial meeting.

Auto-enrolment

 

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With wide coverage in the media, many people will now have heard the term auto-enrolment. Until now it has affected only larger companies however, it is now becoming a legal requirement for businesses of all sizes. In this guide we cover frequently asked questions.

 

The automatic enrolment of an employee into a workplace pension will become a consideration for employers of all sizes.

 

Which businesses are subject to the rules?

 

The requirement applies to any employer with employees who ordinarily work in the UK. It applies to temporary staff, although there is some facility to postpone for staff who have worked less than three months. The rules apply regardless of any other pension contributions made by, or on behalf of, the employee, such as by contributions by a different employer.


Any employee paid up to £486 a month has a right to join the pension scheme if they wish. An employer must oblige an employee’s request but is not bound to make any contributions.


An employee paid between £486 and £833 a month has a right to opt in. If an employee makes a request to join the pension scheme then the employer must make contributions according to table below.


Any employee who is between 22 and the state retirement age (currently 67) and earning over £833 a month will be automatically enrolled. Regardless of any request made by the employee, each employee is enrolled in the company pension and the pension is funded according to the table below. An employee does not have to give permission to be enrolled.


If an employee who has been auto-enrolled does not wish to be a part of the pension scheme then this person will have to specifically opt out.


From when does auto enrolment apply to small businesses?

 

The staging date is the date from which an employer must start to comply with auto-enrolment rules. Where applicable, this would be the date from which contributions will be made to the employee’s pension.

 

For business with 30 employers or fewer, the staging date ranges between 1 June 2015 and 1 April 2017. Newer employer may have a staging date as late as 1 February 2018. If you are an employer, the Pensions Regulator will write to you to let you know the date from which your obligations arise.


It is only possible to auto-enrol from the staging date. However it is possible for a business to make a request for their staging date to be brought forward.

 

How much will I need to contribute?

 

Contributions are a percentage of ‘qualifying earnings.’ These are employment earnings between the lower and upper national insurance limit. It is therefore not possible for the minimum contribution alone to exceed the annual allowance for pensions.

 

The following table sets out the minimum requirements.


  Until 1 October 2017 Between 1 October 2017 and 30 September 2018 From 1 October 2018
Employer contributions 1% 2% 3%
Employee contributions 1% 3% 5%
Total contributions 2% 5% 8%

 

The employee’s contribution will be deducted from gross pay. Therefore it is the amount after deduction of employee’s pension contribution that will be subject to tax. 

There are a number of tax advantages to a pension contribution.

 

It is acceptable to provide employees with more than the minimum requirement.

 

Defined Contribution or Defined Benefit

 

A pension is a method of saving for retirement. Unlike usual savings the money cannot be accessed until the pension holder reaches retirement age. A Defined Contribution (or DC) pension fund increases in value when contributions are made. The contributions are invested with the aim of further increasing its value. This contrasts with a defined benefit scheme, where the pension benefit is known in advance. The benefit is based on earnings and length of time in employment. DC schemes are far more common in practice. The value of investments can go up as well as down.

 

What pension do I provide?

 

As an employer, it is a requirement to set up a pension scheme for the contributions to be paid into.

 

Coman & Co. Ltd are not financial advisers and therefore cannot advise on pension schemes. Many ‘household name’ insurers offer workplace pension schemes. However, some pension providers do not offer a service for that can satisfy the requirements of automatic enrolment.

 

What is a default investment fund?

 

Most pension providers offer a default investment fund. This is the fund that is chosen by the pension provider for any employees who have not stated the investments to be made with their pension money. It is specifically for employees who are either unwilling or unable to make investment decisions about their pension.


According to government reports more than four in five employees opt for the default fund provider. A typical approach by the insurance company is to invest in the stockmarket for younger pension holders. The aim is to grow the value of the pension. As retirement nears the pension will be invested in lower risk assets, such as bonds and gilts. This is to protect the value of the pension.

 

What is the alternative to a default provider?

 

It is possible to invest a pension in a host of funds, shares, bonds and other securities. A Self-Invested Pension Plan (or SIPP) allows its pension holders to take charge of how investments are made. Broadly, SIPPs allow the pension holder greater freedom to choose what, when and how much is invested in the fund.


Even if you are self-employed or a one-person company owner a SIPP or other pension may be suitable. SIPPS can even be used to purchase the commercial premises from which your business operates.

 

My employee does not wish to auto-enrol

 

If an employer has enrolled an employee in the scheme, it is a requirement that the employee remains a member of the workplace pension. However, it is possible for the employee to opt out of making any contribution to the pension.

 

Providing a workplace pension is costly to the employer. Nevertheless, an employer is not allowed to offer any incentive to prevent staff from joining the scheme. Employers are obliged to explain auto-enrolment to staff. The Pension Regulator has provided a template for this purpose. The benefit of employer contributions must be explained.

 

Notwithstanding, an employee may choose to opt out. Employees may, for instance, prefer greater take home pay, even if this means foregoing the extra amount paid into their pension by their employer.

 

If an employee opts out within one moth of joining the scheme a full refund for the employee’s contributions must be made.

 

I am a one person company, or a company where everyone is a director.

 

Provided no more than one of the directors has an employment contract is not necessary to operate a workplace pension. Unless the director specifically wrote an employment contract it is unlikely to exist. A letter from the Pension Regulator regarding any requirement to auto-enrol can be cancelled by following this link:

http://www.thepensionsregulator.gov.uk/employers/What-if-I-dont-have-any-staff.aspx

 

I have my own company, but have not received a letter from the Pension Regulator.

 

Correspondence would probably not be sent by the Pension Regulator to businesses that have indicated they will not be operating a workplace pension. This can be specified on the application to register as an employer.

 

Therefore no further action is necessary.

 

I am not required to operate a workplace pension, but appreciate the retirement planning implication of not having any pension.

 

Consider the benefits (helped by the tax system) of making pension contributions. The most tax efficient method as a one-person-company is to make contributions as an employer.

 

How is auto-enrolment operated via the payroll?

 

The deductions from an employee’s pay and total pension contributions are included on the payslip. Most payroll software will automatically link to the pension provider. The contribution information is transferred to the pension fund and the employer settles the contribution into the pension fund accordingly.

 

Coman & Co Ltd. operate a payroll service for small businesses. As part of payroll we will assist with generating the electronic file sent to your pension provider to meet the compliance requirements. We can ensure that the submission made by the software follows the format acceptable to your pension provider.

 

After the staging date

 

Once auto-enrolment has started, there are further requirements.

 

The employer is required to explain to staff the relevant implications of auto enrolment and the pension fund that the employer has selected on behalf of the company. The Pension Regulator provide a template for this purpose.

 

The pension regulator has stipulated that employers file a compliance declaration within five months of the staging date.

 

It is a requirement to keep auto-enrolment records for six years, and opt out requests for four years.

 

Fines apply for non-compliance.

 

Tax implications

 

Employer contributions can be deducted from profits chargeable to corporation tax.

 

The amount contributed by the employer is not a taxable benefit. Contributions by the employee are deducted from earnings subject to tax and national insurance. More information can be found here.

 

Up to £150 incurred on pension advice provided to an employee is a tax free benefit.  The additional costs of employer contributions will be partly offset by the recent employment allowance, a benefit mainly for small businesses.

2015 Budget

 

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With just 50 days before the election, the Chancellor's announcements included a number of tax-saving proposals. The Budget statements are made in the context of a strengthening British economy, helped (as Mr Osborne grants) "by falling world oil and food prices."  His speech declared a national "comeback", with:

 

 

  • A growth in the UK economy of 2.6% in 2014, the fastest in the G7 group of nations.
  • The number of people in work at a historical high.
  • Britain measuring its lowest recorded level of inflation.

 

 

ISA

 

 

Starting 6 April 2015, the limit on the yearly amount that can be invested in an ISA increases by £240 to £15,240.  The annual limit for a junior ISA also increases to £4,080 up £80 from 2014/15.

 

ISA rules will be more flexible from 2015/16.  Previously the limit was measured with regard only to the amount paid into the ISA.  However, under new rules the limit will be measured by net contributions in the year.  It will be possible to draw funds out the ISA and re-invest them, provided the difference between what is invested and what is withdrawn, the same tax year, does not exceed the limit.

 

 

Help to Buy ISA

 

 

A new type of ISA will be available for first time buyers from Autumn this year.  Under the Help-to-Buy scheme, the government will add £50 to the ISA for every £200 contributed by the saver.  An investment can be made up to an overall yearly limit of £15,000.  The maximum is therefore £12,000 contributed by the saver and £3,000 contributed by the government.  The limit is 10% of £150,000 which is the Treasury estimate of about the average UK property price.

 

 

Savings

 

 

The chancellor announced that from 6 April 2016, there will be no tax payable on the first £1,000 of interest income. Currently, 20% tax is deducted at source from most interest, and 40% taxpayers are therefore required to pay back an additional 20% in tax.  The limit is reduced to £500 for higher rate taxpayers so that the relief is no greater for those on higher income.  The measure is expected to relieve 95% of taxpayers from the burden of tax on their interest.

 

 

Pensions

 

 

There is a lifetime allowance on the amount that can be invested, tax free, in a pension.  The value of the pension is measured against this limit when it vests.  A pension usually vests when the pension holder starts drawing on the pension. There is a tax charge on the value of the pension over the lifetime allowance on the vesting date.  The government proposes to reduce the annual limit from £1,250,000 to £1,000,000 from April 2016.

 

A pensioner will also no longer be forced to buy annuity from next April.  In other words, a pensioner will no longer have to receive a fixed annual payment, calculated partly by reference to life expectancy.  Instead pension holders will be able to access their pension funds as cash withdrawals.

 

Under the current rules, a taxpayer would have to pay tax at a rate of 55% when they sell their annuity.  This will be altered so that a taxpayer will pay tax at their marginal rate (for instance, at 20% if a basic rate taxpayer.)

 

 

Personal allowance

 

 

The personal allowance, or the amount of income that a person can receive tax free, is set to increase over the next three years.  With effect from 6 April 2016, the personal allowance will rise to £10,800, a £200 increase from 2015-16.  The personal allowance is also set to rise again to £11,000 on 6 April 2017.

 

 

Basic rate

 

 

So that higher rate taxpayers are no worse off following the personal allowance, an increase the basic rate threshold is also due to rise.  Starting 6 April 2015, an individual must earn £42,385 before paying tax at the higher rate of 40%.  This basic rate tax threshold will rise by £315 in 2016-17, and by £600 in 2017-18.  The basic rate band will therefore be £43,300 in 2017-18.  The escalation in the limit is above inflation and therefore prevents us paying more in real terms, an effect known as fiscal drag.

 

 

Married couples' allowance

 

 

Where a spouse has income less than the personal allowance, they can transfer some of their allowance to their married partner.  Consequently, the married partner can benefit from a higher tax free amount that their spouse is not using.  From 6 April 2015, the amount of allowance that can be transferred will rise to £1,100.

 

 

Class 2 NICs

 

 

Class 2 national insurance is a fixed amount payable by self-employed individuals.  The government has announced that it will abolish this tax from the next Parliament.

 

 

Under 21 NICs

 

 

From next April, there will be no employers' national insurance liability arising from salary paid to an employee under twenty one.

 

 

Company cars

 

 

Where an employer provides a company car, the employee is taxed on this benefit in kind.  The higher the Carbon Dioxide emissions of the car the more benefit the employee is deemed to have received.  This is to encourage companies to provide more fuel efficient work vehicles.  The government announced, that in 2019/20 the rate applicable to low-emission vehicles will be lower than previously announced.  On the other hand, the rate for other vehicles will increase 3%.

 

 

Tax returns

 

 

From early 2016, the government plans to scrap the Tax return, and instead introduce digital tax accounts.  Further details are awaited.

 

 

 

Annual investment allowance

 

 

There is currently an annual allowance in place to enable business to immediately deduct the cost of purchasing assets, such as computer equipment, from taxable profits.  The rate is currently £500,000 but due to fall to £25,000 at the end of this year.  In his speech the chancellor confirmed that this considerable drop will not occur.

 

 

Corporation tax

 

 

As part of a previously announced measure the rate of corporation tax will lower again to 20% from 1 April 2015.  Britain will have one of the lowest company tax rates of any major economy in the world.

 

 

 

2014 Budget

 

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Delivered at 12.30 today, the chancellor's fifth budget contains a number of tax incentives for so called 'doers, makers and savers.' A round up of the main changes is explained below.

 

Stamp duty on property worth over £500,000

 

The threshold for stamp duty on residential property purchased via a company will lower from £2 million to £500,000. The new threshold takes effect from midnight (19 March 2014.) The measure provides a further disincentive to owning a property via a company.

 

Up to £2,000 state help with childcare costs

 

From September 2015, families where both parents work will be able to obtain government support for the cost of childcare on any of their children aged 11 or younger. Eligible couples will be able to open an online 'tax-free childcare' account which will be administered by HMRC in conjunction with NS&I. The government will contribute 20 pence for every 80 pence paid into an account. Under new proposals, up to £8,000 can be contributed by parents into the fund. Where the maximum is contributed, £2,000 of childcare subsidy would be obtained.

 

The scheme is open to all parents, except where both parents are earning over £150,000.

 

Parents using a childcare voucher scheme can continue to use the scheme as an alternative until their child reaches 15 years old. This will be particularly beneficially for parents with children between 12 and 15 who have not moved employer.

 

Premium bond limit lifted to £50,000

 

The cap on amounts that can be invested in a premium bond will be raised in June from the current threshold of £30,000 to £40,000. A further increase in the limit to £50,000 will be introduced from 2015/16. Premium bond pay-outs are tax free, but the limit of £30,000 has been in place since 2003.

 

ISAs limit increase to £15,000

 

From 1 July 2014, the limit that can be invested in an ISA will increase from to £11,520 to £15,000 and the full amount can be invested in cash. The previous rules restricted the amount that could be invested in cash (to £5,760 for 2013/14.)

 

Pension annuities to be abolished

 

From 5 April 2015, pensioners will no longer be required to convert their pension into an annuity. Previously, pensioners had to purchase of an annuity from their pension pot on reaching age 75. An annuity is a guaranteed income for life which is based mainly on the value of the pension fund, prevailing interest rates and life expectancy. It is hoped that greater choice for pensioners will improve the competitiveness of annuity products.

 

The alternatives of fixed term annuities or income draw-down may leave surplus funds in the pension to be transferred on death.

 

Most pensioners will have a cap placed on the amount that can be withdrawn. A few pensioners, which sufficient other income, will be able to drawdown unlimited amounts from their pension.

 

10 pence savings rate to be scrapped

 

The budget contained welcome news for low income savers, with the abolition of the 10% tax rate.


Where a person's total income is less than the personal allowance and the starting rate, savings income has been taxed at 10%. For 2013/14 the personal allowance was £9,440 and the starting rate was £2,790. Therefore in 2013/14, an individual with total income of £12,230 of which £2,790 was bank interest, would have a tax liability of £279.

 

Following the budget announcement, a new starting rate of 0% will be introduced for savers and will apply to the first £5,000 of taxable income. This is almost double the current limit.

 

Further rises to the personal allowance

 

The chancellor announced that the personal allowance will increase again to £10,500 on 6 April 2015. However unlike previous increases in the personal allowance there is no corresponding decrease in the amount taxed at the basic rate. Therefore all taxpayers with an income up to £100,000 will benefit. The personal allowance is clawed back when income exceeds £100,000.

 

Social investment and film tax relief

 

From 6 April a 30% tax relief will be available for investment into social enterprise, such as charities and community interest companies. There are increases to film tax relief and tax relief for theatre productions.

 

Annual investment allowance to double

 

The annual investment allowance (AIA) will be increased from £250,000 to £500,000 with immediate effect and until the end of 2015. The AIA determined the amount that can be invested in capital assets and deducted from profits in the year of investment. All but the very largest business will therefore be able to obtain immediate tax relief for capital investment.

 

Abolishing class 2

 

The flat rate of national insurance payable by sole traders and partners will be abolished. The change will reduce an administrative burden on the self-employed.

 

Employment allowance

 

As previously announced the government will be introducing the employment allowance of particular benefit to small business employing staff.

 

With experience in dealing with a range of tax issues, Coman & Co. would be pleased to assist with your tax compliance or tax advice requirements. Please contact us for an initial consultation.

Simple situations. Complex situations. If it goes on a Tax Return we deal with it. Contact us for a free, initial meeting.

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