Looking Forward To Tax Breaks

Christmas is here and it’s a good time to plan ahead both in business and personally, Neil Roberts Director of Wright Vigar explains some of the good tax breaks you may want to tax advantage of in the coming year.

Business Taxes

National Insurance – £2,000 employment allowance

The Government will introduce an allowance of up to £2,000 per year for many employers to be offset against their employer Class 1 National Insurance Contributions (NIC) liability from April 2014.

There are also rules to limit the employment allowance to a total of £2,000 where there are ‘connected’ employers. For example, two companies are connected with each other if one company controls the other company.

The allowance is limited to the employer Class 1 NIC liability if that is less than £2,000.

It is expected that the allowance will be claimed as part of the normal payroll process. Employer’s payment of PAYE and NIC will be reduced each month to the extent it includes an employer Class 1 NIC liability until the £2,000 limit has been reached.

Employer NIC for the under 21s

Something to consider over the coming year when you are planning ahead is that from April 2015 the Government will abolish employer NIC for those under the age of 21. This exemption will not apply to those earning more than the Upper Earnings Limit, which is £42,285 per annum for 2015/16. Employer NIC will be liable as normal beyond this limit.

Business Rates

A package to help all businesses in England with the cost of business rates, with particular support for the smallest businesses has been announced. The following measures are introduced from 1 April 2014:

• Businesses with retail and food and drink premises with a rateable value of up to £50,000 will receive a discount of £1,000 on their business rates for a period of two years
• The RPI rate increase will be capped at 2% for one year
• A ‘reoccupation relief’ will be introduced which will provide a 50% business rates discount for 18 months where businesses move into retail premises that have been empty for more than 12 months. Businesses which move into empty premises between 1 April 2014 and 31 March 2016 will be eligible for the relief (subject to state aid limits)
• Businesses will be allowed to pay their rates in 12 monthly instalments, rather than 10
• The doubling of the Small Business Rate Relief (SBRR) will be extended for a further 12 months to April 2015
• The SBRR criteria will be amended to allow businesses in receipt of SBRR to keep it for one year when they take on an additional property that would currently cause them to lose SBRR

Exemption threshold for employment-related loans

Where an employer provides an employee with a cheap or interest free loan they have to report notional interest on the loan at 4% per annum on the form P11D. Where the balance of the loan is no more than £5,000 throughout the tax year no benefit is reportable.

From 6 April 2014 where the total outstanding balances on all such loans do not exceed £10,000 at any time in the tax year, there will not be a tax charge and employers will no longer be required to report the benefit to HMRC.

Warning: If the loan is made to an individual who have an interest or shares in the company (known as participators) or an associate of the individual such as a family member, then 25% corporation tax charge can arise if the loan is outstanding nine months after the end of the accounting period. Legislation is in place to prevent avoidance where the loan is re-paid and then taken out again within a short period of time.

Personal Taxes

The personal allowance for 2014/15

For those born after 5 April 1948 the personal allowance will be increased from £9,440 to £10,000. When the current Government came into power in 2010 the personal allowance was £6,475 so there has been a significant increase.

Tax bands and rates for 2014/15

The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced from £32,010 to £31,865 so that the threshold at which the 40% band applies will rise from £41,450 to £41,865 for those who are entitled to the full basic personal allowance.

The additional rate of tax of 45% is payable on taxable income above £150,000.

Transferable Tax Allowance for some

In October the Government announced that from April 2015 married couples and civil partners may be eligible for a new Transferable Tax Allowance. The Transferable Tax Allowance will enable spouses and civil partners to transfer a fixed amount of their personal allowance to their spouse.

The option to transfer will be available to couples where neither pays tax at the higher or additional rate. If eligible, one partner will be able to transfer £1,000 of their personal allowance to the other partner. It will mean that the transferee will be able to earn £1,000 more before they start paying income tax.

The claim will be made online and entitlement will be from the 2015/16 tax year. Couples will be entitled to the full benefit in their first year of marriage.

For those couples where one person does not use all of their personal allowance the benefit will be up to £200.

These are some of the positive tax breaks to be introduced over the next year and a half, unfortunately there are also some negatives which we will address in future articles.  For now please enjoy the remainder of your Christmas break and we wish you a Happy and prosperous New Year.

Author Neil Roberts

If you would like to discuss in more detail anything raised in this article, or would like to have a chat about your own personal circumstances, please contact one of our specialist tax team at your local office – click here for details of our offices.

Technical content correct at time of publishing.