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The Autumn Statement 2014

There was a lot in the Autumn statement this year, the big ticket items being divulged over the past few days i.e additional £2bn for NHS, £15bn for transport. The chancellor went through the usual forecasts and projections for deficit, GDP, growth and unemployment which obviously had an optimistic spin with a May 2015 election looming. But what were the measures and impact for business and individuals as a whole?

 

Income Tax

(Effective from 6 April 2015)

·         Personal allowance increased from £10,000 to £10,600 (£100 more than was expected)

·         Higher rate tax threshold increased from £41,865 to £42,385

So anyone being paid salary up to the higher rate tax threshold will see an increase in net income of £536 per annum (including £16 per annum tax saving).*

 

Example:

   2014/15 2015/16  Tax Saving/Net Income increase
  £ £ £
HRT 41,865  42,385  
Allowance   10,000  10,600  
Taxable     31,865  31,785  
Tax @ 20% 6,373   6,357  16
Net Income 35,492 36,028 536

* calculation is for tax purposes only and does not account for effect of national insurance changes.

 

Savings and Investments

·         Tax free ISA Allowance will rise from £15,000 to £15,240 and no longer subject to inheritance tax

·         Income derived from pension annuities will no longer be subject to inheritance tax

 

Stamp Duty Land Tax

This was the big surprise of the Autumn Statement and will now work like income tax, with higher percentages payable on the incremental increases in purchase prices only rather than a flat rate percentage being levied on the whole amount.  This change came into effect at midnight on 3 December 2014 and buyers have the option of using the old regime or the new one if completion has not taken place.  Please note from 6 April 2015 Scotland will have a different structure for Stamp Duty Land Tax.

 

The new rates are:

Percentage Purchase Price Increment Stamp Duty Payable
  £ £ £
0% up to 125,000 - -
2% up to 250,000      125,000   2,500
5% up to 925,000 675,000  33,750
10% up to 1.5m 575,000  57,500
12% over 1.5m    *subject to purchase price  

 

Example: Purchase price £275,000, under old rules SDLT payable £8,250 (£275,000 x 3%), under the new rules only £3,750 would be payable a saving of £4,500 as only £125,000 would be subject to a 1% charge and £25,000 would be subject to a 5% charge.

 

Business Measures

·         Increased funding for government backed venture capital funds that invest in SMEs

·         £500m guarantee for new bank lending to SMEs

·         No national insurance on apprentice salaries

·         Business rates relief doubled for another year and inflation linked increase capped at 2%

·         Business rate discount for retail sector increased from £1,000 to £1,500 in 2015/16 for properties with a rateable value of less than £50,000

 

Energy Sector

·         2% cut in supplementary charge from 32% to 30% with effect from 1 January 2015 (additional corporation tax levied on oil and gas producers in addition to ring fenced corporation tax at 30%)

·         Creation of “Northern Sovereign Fund” from shale gas revenues

·         Fuel duty frozen for the foreseeable future

·         Cluster Area Allowance to encourage multi site exploration

·         Extension of the ring fence expenditure allowance from six years to ten years, allowing investors to offset costs against future production

·         Secretary to the Treasury, Danny Alexander to make further announcements in Aberdeen (Thursday, December 4 2014)

 

Changes to goodwill on incorporation

Up until now it was possible for a sole trader or partnership to qualify for Capital Gains Tax Entrepreneurs’ Relief on the value of the goodwill transferred to the company on incorporation of the business.  This meant that only 10% tax would have to be paid.  From now on, ER will not be available so CGT of 28% will be due.  Additionally, it was also possible for the company to get an immediate deduction for the goodwill acquired.  From now on this will only be given when the goodwill is sold.

 

There were further measures outlined in the Autumn Statement and a fully copy can be downloaded at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/382327/44695_Accessible.pdf

 

If you would like to discuss any of the measures introduced and how they affect you, then do not hesitate to contact us.