- BUDGET 2014
- CHANGES TO THE ISA REGIME
- SAVINGS BAND AND RATE FOR 2014/15
- PENSION CHANGES
- PENSIONS – CHANGES TO COME
- DOUBLING OF THE ANNUAL INVESTMENT ALLOWANCE
- RESEARCH AND DEVELOPMENT (R&D) RELIEF
- NEW TAX-FREE CHILDCARE SCHEME
- SHARED PARENTAL LEAVE AND PAY
- HMRC ISSUE GUIDANCE ON BITCOIN
- ADVISORY FUEL RATES FOR COMPANY CARS
- PAYE PENALTIES
The Chancellor delivered his Budget Speech on Wednesday 19 March and set the scene for the announcements stating that:
‘If you’re a maker, a doer or a saver: this Budget is for you.’
Main Budget tax proposals:
• The starting rate band for savings will be increased from April 2015 and the current 10% tax rate reduced to nil.
• Individual Savings Accounts (ISAs) are to be simplified by merging the cash and stocks ISAs together with a significant increase in the investment limit
from 1 July 2014.
• Radical changes are to be made to the pensions regime including removing the restrictions on access to pension pots so there will no longer be a
requirement to buy an annuity.
• The Annual Investment Allowance is to be doubled to £500,000 until 31 December 2015.
• An increase will be made in the R&D tax credit available to loss making SMEs to 14.5%.
We have included articles on these main proposals. However please do get in touch if you would like further information on Budget announcements.
Internet link: Walker Thompson Ltd
From 6 April 2014 the overall ISA savings limit will be increased from £11,520 to £11,880 of which £5,940 can be invested in cash. From 1 July 2014 ISAs will be reformed into a simpler product, the ‘New ISA’ (NISA) and all existing ISAs will become NISAs.
From 1 July 2014 the overall annual subscription limit for these accounts will be increased to £15,000 for 2014/15. Special rules apply if investments are made before 1 July 2014. Investments for 2014/15 cannot exceed £15,000 in total.
Savers will also be able to subscribe this full amount to a cash account (currently only 50% of the overall ISA limit can be saved in cash). Under the NISA, investors will also have new rights to transfer their investments from a stocks and shares to a cash account.
There are also changes to the rules on the investments that can be held in a NISA to include a wider range of securities.
Internet link: Factsheet
The Chancellor announced changes to the maximum amount of an eligible individual’s savings income that can qualify for the starting rate of tax for savings. The band will be increased to £5,000 from £2,880, and this starting rate will be reduced from 10% to nil. The 10% rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income) exceeds the starting rate limit.
This will increase the number of savers who are not required to pay tax on savings income, such as bank or building society interest.
Internet link: Factsheet
The Chancellor has announced a range of significant measures to bring greater flexibility to individuals who want to access funds in defined contribution pension schemes. Some changes to the current restrictive rules will come into effect from 27 March 2014 whilst further measures will follow in April 2015 after a period of consultation.
Pensions – immediate measures
The immediate measures come into effect from 27 March and cover four broad areas.
Capped drawdown. An individual aged 55 or over can opt for a drawdown pension which allows them to extract amounts from the pension fund which is treated as income for the relevant year. Currently the maximum amount of drawdown is fixed to ensure that the fund is not cleared too quickly. The cap is based on 120% of a notional annuity rate set by the Government Actuary. The cap will be increased to 150%.
Flexible drawdown. Where an individual aged 55 or over can demonstrate that they have pension income (including the state pension) of £20,000 per annum or more they can ignore the drawdown cap and can take whatever amount they wish. Tax will be payable at their marginal rate. The income limit is to be reduced to £12,000 per annum.
Trivial commutation. At present an individual aged 60 or over who has total pensions savings of £18,000 or below can withdraw this as a lump sum. The limit will be increased to £30,000.
Small pots. The Government will increase the amount for small individual pension pots that can be taken as a lump sum regardless of total pension wealth from £2,000 to £10,000. They will also increase the number of small pension pots that can be taken as lump sums from two to three.
Internet link: Pensions explained
The Government plans to bring even greater flexibility into the pension system from April 2015. In effect an individual will be able to choose what they want to do with their defined contribution pension fund.
• If they want to draw out all of the fund on retirement they will be able to do so. The tax free element will be 25% of the sum and the balance will be
taxed as income in that year.
• If they wish to buy an annuity they will be able to do so.
• If they wish to opt for a drawdown arrangement they will be able to do this without any restriction either in the form of a cap or a minimum income
These changes will be subject to a consultation and we will keep you informed of developments.
Internet link: Pensions explained
The Annual Investment Allowance (AIA) provides a 100% deduction for the cost of most plant and machinery (not cars) purchased by a business up to an annual limit and is available to most businesses. Where businesses spend more than the annual limit, any additional qualifying expenditure generally attracts an annual writing down allowance of only 18% or 8% depending on the type of asset.
The maximum amount of the AIA was increased to £250,000 from £25,000 for the period from 1 January 2013 to 31 December 2014. The amount of the AIA is further increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. The AIA will return to £25,000 after this date.
The Government has stated that the increased AIA will mean that up to 99.8% of businesses could receive 100% upfront relief on their qualifying investment in plant and machinery.
If you would like further information on how this may affect your business please do get in touch.
Internet link: Gov.uk Budget
R&D relief gives additional tax relief to companies for expenditure incurred on R&D projects that seek to achieve an advance in science or technology. For an SME company which incurs losses when conducting R&D activity, a tax credit can be claimed by way of a cash sum paid by HMRC.
From 1 April 2014 the rate of the R&D payable tax credit will be increased from 11% to 14.5%.
Internet link: Gov.uk Budget
The Government has announced details of the new Tax-Free Childcare scheme which is to be launched this autumn.
The relief will be 20% of the costs of childcare up to a total of childcare costs of £10,000 per child per year. The scheme will therefore be worth a maximum of £2,000 per child. The original proposal had a cap of 20% of £6,000 per child.
The scheme will be launched in autumn 2015. All children under 12 within the first year of the scheme will be eligible. Under the original proposal only children under five would have been eligible in the first year of the scheme.
To qualify for Tax-Free Childcare all parents in the household must:
• meet a minimum income level based on working eight hours per week at the National Minimum Wage (around £50 a week at current rates)
• each earn less than £150,000 a year, and
• not already be receiving support through Tax Credits or Universal Credit.
Self-employed parents will be able to get support with childcare costs in the Tax-Free Childcare scheme, unlike the current employer supported childcare scheme. To support newly self-employed parents, the Government is introducing a ‘start-up’ period. During this period a newly self-employed parent will not have to earn the minimum income level.
The current system of employer supported childcare will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. Employer supported childcare will continue to be open to new joiners until the new scheme is available.
It is proposed that parents register with the Government and open an online account. The scheme will be delivered by HMRC in partnership with National Savings and Investments, the scheme’s account provider. The Government will then ‘top up’ payments into this account at a rate of 20p for every 80p that families pay in.
Internet link: News
The Government has issued the draft regulations for Shared Parental Leave and Pay which are expected to become law from 1 October 2014 and will apply to babies due from April 2015.
The draft regulations set out the new statutory shared parental pay entitlements for parents. The press release states that:
‘The Act will also help people to better balance their work and home life with the following measures:
• From April 2015, mothers, fathers and adopters can opt to share parental leave around their child’s birth or placement. This gives families more choice
over taking leave in the first year – dads and mothers’ partners can take up to a year, or parents can take several months at the same time;
• From 1 October 2014, prospective fathers or a mother’s partner can take time off to attend up to two antenatal appointments;
• Adoption leave and pay will reflect entitlements available to birth parents from April 2015 – no qualifying period for leave; enhanced pay to 90% of
salary for the first 6 weeks; and time off to attend introductory appointments. Intended parents in surrogacy and “foster to adopt” arrangements will
also qualify for adoption leave and pay;
• Extending the right to request flexible working to all employees from 30 June 2014;
• Replacing the current statutory procedure, through which employers consider flexible working requests, with a duty on employers to consider requests
in a ‘reasonable’ manner.’
Employment Relations Minister Jenny Willott said:
‘Current workplace arrangements have not kept up with the times. The Children and Families Act will bring the way new parents balance their working and home lives into the 21st century.’
Internet link: BIS press release
HMRC have issued guidance on the tax treatment of income received from, and charges made in connection with, activities involving Bitcoin and other similar cryptocurrencies.
Internet link: VAT brief
New company car advisory fuel rates have been published to take effect from 1 March 2014. HMRC’s website states:
‘These rates apply to all journeys on or after 1 March 2014 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’
The advisory fuel rates for journeys undertaken on or after 1 March 2014 are:
|1400cc or less||14p||12p|
|1401cc – 2000cc||16p||14p|
|1600cc or less||9p|
|1601cc – 2000cc||11p|
Please note that not all of the rates have been amended, so care must be taken to apply the correct rate.
Other points to be aware of about the advisory fuel rates:
• Employers do not need a dispensation to use these rates.
• Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims
should be based on the actual costs incurred.
• The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the
guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.
If you would like to discuss your car policy, please contact us.
Internet link: HMRC advisory fuel rates
HMRC are to introduce further interest and penalties for the late submission of PAYE RTI returns and for late payment of PAYE liabilities. The penalties will be introduced as follows:
• April 2014 – in-year interest on any in-year payments not made by the due date
• October 2014 – automatic in-year late filing penalties
• April 2015 – automatic in-year late payment penalties
If you would like any help with PAYE matters please do get in touch.
Internet link: Press release