Initial thoughts on the #Budget2014

In his penultimate budget before the general election, George Osborne pledged to champion ‘the makers, the doers and the savers’ of Britain.

As usual, the devil is always in the detail, and personal circumstances should always be taken into consideration, but below are some of the highlights of today’s statement delivered in the House of Commons.

Personal Tax

The Chancellor has been gradually raising the personal allowance to his targeted sum of £10,000, but today he announced that for 2015-16 the allowance would increase to £10,500. The 40p tax rate threshold will rise from £41,450 to £41,865 from next month and then up by a further 1% to £42,285 next year. Also coming into effect for 2015-16 is the transferable tax allowance for married couples and civil partners, announced in the Autumn statement.  Where neither party is paying tax at the higher rate, one partner can transfer £1,050 of their personal allowance to the other.

To encourage savers, the Chancellor announced the abolition of the starting rate of 10% for savings income. The maximum amount of income that can qualify for the 0% rate will be £2,880 in 2014-15 and £5,000 in 2015-16. In addition, the amount that can be saved in a tax free ISA will increase to £15,000 per annum from 1 July 2014, and restrictions on the transfer of funds between a stocks and shares ISA and a cash ISA will be removed.

Pensioners

Several measures were announced to improve the flexibility pensioners will have in drawing their pensions from 27 March 2014.  Legislation is to be introduced to:

– Reduce the minimum income requirement for accessing flexible draw down to £12,000
– Increase the capped draw down limit to 150% of an equivalent annuity
– Allow individuals over 60 with total pension savings of £30,000 or less to take out all of those savings as one or more trivial commutation lump sums
– Raise the size of pension
– Increase the number of small pension pots that can be taken as a lump sum to three

So what is in it for businesses?

The change that will bring benefit to most businesses is the increase in the annual investment allowance.  The current allowance of £250,000 a year was set to expire at the end of December 2014.  The allowance has now been increased to an all time high of £500,000 per annum which will run from 1 April 2014 for companies, and 6 April 2014 for other businesses up to 31 December 2015. After that, barring any further extension, it will drop back to £25,000 per annum.

For loss making small or medium sized enterprises carrying out qualifying research and development, the rate of the payable tax credit on R&D losses surrendered will increase from 11% to 14.5%.

The Seed Enterprise Investment scheme was introduced in April 2012 offering investors tax relief for investing in small early-stage companies which often found it difficult to get finance from more traditional sources.  This scheme was initially for a period of five years, but the Chancellor today announced that he was making it permanent.

The Chancellor was also keen to remind us that the rate of corporation tax will be 21% from 1 April 2014 and 20% from 1 April 2015. There was also a reminder that from 1 April this year, the employment allowance of £2,000 will be available to every business in the country and that from 1 April next year, the under 21’s will be taken out of the jobs tax.

As a final anecdote……….

If this budget has driven you to drink, you will be pleased to learn that the alcohol duty escalator has been scrapped in favour of a rise with inflation, Scottish whisky duty has been frozen and beer duty is down 1p a pint.

For those of you who just need to get away, September’s fuel duty rise will not be brought in and from 2015, all long haul air passenger flights will carry the same lower rate of tax.