On 19th of March 2014 the chancellor George Osborne delivered a new 2014 Budget and we would like to provide you with quick overview of key changes which were set up in this budget.
The key changes
• Level at which people start paying income tax to be increased to £10,500.
• Cash and shares Isas to be merged into single New Isa with £15,000 annual limit.
• All restrictions on access to pension pots to be removed, ending the requirement to buy an annuity.
• New Pensioner Bond available from January.
• Beer duty cut by 1p a pint while duty on spirits, whisky and ordinary cider is frozen. Tobacco duty to rise by 2 per cent above inflation.
• All long-haul flights to come under lower rate of Air Passenger Duty currently charged on flights to US.
• Help to Buy for new-build homes extended to 2020.
• Bingo duty halved to 10 per cent but duty on fixed-odds terminals rises to 25 per cent.
• Package to cut energy bills.
• Tax avoidance, increasing HRMC's budget to tackle non - compliance.
The UK economy and public finances:
The deficit as a share of GDP is forecast to have fallen by a half by 2014-15 compared to 2009-10, and the Office for Budget responsibility (OBR) forecasts a small surplus by 2018-19. Budget 2014 announces further detail on the difficult decisions needed to reduce the deficit and debt beyond this Parliament, including setting the level of the welfare cap and controlling the cost of public sector pay and pensions.
A record number of people are in work and business investment is forecast to increase this year. Budget 2014 sets out further action to help businesses invest and export, to reduce energy costs – especially for manufacturers – and to increase housing supply.
The tax allowance for investment has been increased to £500,000 and will run to the end of 2015. The annual limit on business investment tax relief stands at £250,000 in 2014, but will fall back to £25,000 from the beginning of 2015.
There will be an increase in the amount of loans from £1.5 billion to £3billion for foreign buyers to purchase goods and services from the UK. A £7billion relief package for businesses that will reduce energy bills over the next few years.
Firms and individuals who are disputing with the UK tax office over their use of tax avoidance schemes will have to pay the disputed sum to the government.
Those using the schemes will get their money back, with interest, if they win, Chancellor George Osborne announced yesterday. HMRC will also be able to directly seize money owed from bank accounts. The Government plans to give HRMC power to recover tax directly from debtors' bank accounts where they owe more than £ 1,000 and have previously been contracted about paying the tax. The Treasury says the new power will bring the UK tax authorities in line with France and the US tax authorities, which already have this power.
In total, the new tax rules may recoup £385m in 2015. "While the vast majority of wealthy people pay their taxes, there is still a small minority who do not,' said Mr Osborne. "We will now require those who have signed up to disclosed tax avoidance schemes to pay their taxes, like everyone else, up front." The chancellor also said the government would seek to stop companies cutting their tax bill by moving money between their subsidiaries."These payments will be disregarded for tax purposes, and companies will pay tax on profits generated in the UK," the Budget document said. Mr Osborne expects to recover £290m in the 2015 financial year and £1.23bn the year after by forcing those using registered tax avoidance schemes to pay disputed money to the state. Mr Osborne cut the threshold for companies having to pay 15% stamp duty on home purchases from £2m to £500,000. "Many of these are empty properties held in corporate envelopes to avoid stamp duty," Mr Osborne said. "This abuse will end.''
Changes to the personal tax allowance, to the higher rate threshold:
The increase to the personal allowance conveys the government's target to help those on low and middle incomes. This measure will reduce income tax for several million income tax payers, including low and middle income tax payers. It will also create incentives to enter employment, and increase household disposable incomes.
Legislation has been introduced in Finance Bill 2014 to increase the personal allowance by £560 in 2014-15, meeting the Government's commitment to increase it to £10,000. Finance Bill 2014 has also introduced legislation to reduce the basic rate limit by £145 to £31,865 in 2014-15.
The personal tax allowance will be further increased to £10,500 for those born after 5 April 1948. The basic rate limit will be further reduced to £31,785.These changes will come into force in 2015-16.
For tax years 2014-15 and 2015-16, the higher rate threshold (the level of income after which taxpayers begin to pay the 40 per cent higher rate of tax) will increase by 1 per cent to £41,865 and £42,285 respectively. The higher rate threshold is the sum of the personal allowance and the basic rate limit. For the tax year 2014-15 the higher rate threshold of £41,865 will be made up of a personal allowance of £10,000 and a basic rate limit of £31,865. For the tax year 2015-16 the higher rate threshold of £42,285 will be made up of a personal allowance of £10,500 and a basic rate limit of £31,785.
Changes to National insurance contributions (NIC):
The primary threshold for employees will rise from £7,755 to £7,956 while the upper earnings limit goes up from £41,450 to £41,865.
A new NIC employment allowance begins in April 2014. Every business, charity and Community Amateur Sports Clubs will be entitled to an annual employment allowance of £2,000 to reduce their liability for Class 1 secondary National Insurance Contributions (NICs).
Changes to the Isa allowance:
The annual Isa allowance will be increased from £11,520 to £15,000.
From July 1, stocks and cash individual savings accounts (ISAs) will be merged into one single allowance of £15,000, which will scrap current rules that mean savers can only put half of their £11,520 entitlement into a cash ISA, while they could invest the whole allowance into a stocks ISA.
Posted on Mar 18, 2014.