This was a political budget aimed at appeasing sectors of the voting public whose votes are needed. Most of the changes won’t take effect until just before the general election – so they are then fresh in the memories of the voting public! Clever.
Much was predicted with a few surprises.
Some key highlights are set out below which may impact the types of clients we work with:
Impacting everyday people;
A much cheered for penny off the pint – again. A cancellation of the fuel duty escalator. A reduction in bingo duty. All small giveaways aimed at raising popularity.
Then some surprises.
The creation of a new ISA with a higher limit of £15,000 a year and no distinction between cash or stocks and shares ISAs. Some much needed simplicity. Expect to see new products on the market in July. Also the new NS&I bond – again aimed at encouraging savings, and winning the votes of savers who’ve seen their income drop due to low interest rates.
Then as George Osborne put it; ‘the biggest reforms to pensions since the 1920s’. Applies initially to defined contribution schemes – which are the most common pensions nowadays.
Removing the requirement to buy an annuity, increasing flexibility on pension drawdowns and reducing the tax rate on unauthorised payments from pensions from 55% to in most cases 20%. These are welcome changes with some changes applying from tomorrow, 27 March, and others from April 2015.
And the other predicted change, an increase in the personal allowance for 15-16 to £10,500. The rate for 14-15 will be £10,000.
And for those paying higher rate tax, the threshold will increase slightly for 14-15 and 15-16, a move to appease middle earners.
And if you’re selling a property over £500,000 it will now be subject to the higher rate of SDLT of 15% (the threshold has dropped from £2m).
Lastly, the tax free child care scheme is expanded to up to 12 year olds and increased annual limit of up to £2000 per year. The Scheme will start in Autumn 2015.
The Annual Investment Allowance – which allows businesses to get tax relief for investment in assets such as plant and machinery, computers etc in the year they invest (rather than spread over a number of years) has been increased to £500,000 per year from its current £250,000. This increase in the limit will assist medium and larger companies, with the ability to invest over £250,000 a year in assets.
The cash credit for qualifying R&D for loss making businesses will increase from 11% to 14.5% of qualifying expenditure for SMEs. This will be of benefit to businesses seeking to achieve scientific or technological advances.
Reduction in ‘green taxes’ to reduce manufacturing energy bills. This could be said to incentivise manufacturers to use more energy and increase carbon emissions. Lets hope manufacturers are also looking at reducing energy use too. Recent Ecomomia article stated that as energy costs are still only 1-3% of turnover, most CFOs aren’t focusing on reducing energy use even though prices are increasing and will continue to do so.
Great news that SEIS investment scheme will continue – the scheme allows tax relief of 50% of amounts invested in qualifying companies – usually small start up businesses and other capital gains reliefs. If you’re a small business looking for equity investment SEIS and its big brother EIS are definitely worth considering.
But EIS and SEIS will no longer be available for companies who also receive Renewable Heat Incentive RHI or Renewable Obligation Certificates ROCs. A warning to community energy groups who may have wanted to expand their activities away from FITs – if they do so their investors may not get such attractive tax breaks. The Guardians recent article has more.
A small bit of simplification for the self employed. Class 2 NICs which currently are paid monthly or quarterly, will now be collected through the self assessment system with Class 4 NICs and Income Tax. A small simplification which will apply in 2016.
And one worrying thought for the future – HMRC could be given powers to take tax owed from bank accounts without the tax payer agreeing! A consultation will be launched before this power is put in place. I’m sure there will be lots of safe guards – but is it necessary – HMRC can already take a tax payer to court to pursue payment of unpaid taxes. What if HMRC took money out of your bank which you’d earmarked to pay your staff or a vital supplier or to pay your electricity bill before you were cut off. Or what if HMRC made a mistake…
Overall it was a political budget with some good incentives for savers, beer drinkers, drivers and those about to retire. But for the average small business, the impact is negligible. It’s the Employment Allowance (from 6th April 2014), which was announced in the previous Budget, that is still the most significant benefit for small businesses who employ staff.