It was a fairly short budget this year and obviously a budget aimed at the May 2015 elections and measures to be implemented in the next parliament. The chancellor reflected on the fall in the oil price (good for the economy as a whole), the downward forecast for world economic growth, the eurozone and political uncertainty.
The big miss was there was no mention regards national insurance limits/rates or VAT thresholds and rates.
Personal Tax & National Insurance
· Personal allowance increased from £10,600 to £10,800 (2016/17) then to £11,000 (2017/18).
· Higher rate tax threshold increased to £43,300 by 2017/18 and will be indexed linked.
· MCA to rise to £1,100.
· Class 2 national insurance to be scrapped in the next parliament.
· Review of deed of variations for inheritance tax in the next parliament for tax avoidance reasons.
· Abolition of annual self assessment tax return to be replaced with digital return.
Savings, Investments & Pensions
· Lifetime allowance for pensions reduced from £1.25m to £1m (indexed from 2018).
· Access to annuities for existing pensioners.
· Pension drawdowns and caps to be scrapped.
· Punitive tax charge for withdrawals of 55% to be replaced with marginal rate of tax (similar to income tax).
· Personal savings allowance allowing first £1,000 of income derived from savings to be tax free (£500 for higher rate tax payers).
· New ISA’s to be launched:
- Fully Flexible (retain tax free status on withdrawals and reinvestment in same tax year).
- Help to Buy ISA – government to top up by 20% to help first time buyers (max.£3,000).
· Main corporation tax rate to be reduced to 20% (in line with SME rate).
· Minimum wage increased (aim to be £8 per hour by 2020).
· Annual investment allowance will not be cut to £25,000 in 2015/16.
· Business rates relief doubled for another year to 2016/17.
· Farmers allowed to average income over five years for tax purposes.
· Entrepreneurs relief to be reviewed so only applied to “genuine businesses”.
· Business rates to be reviewed.
· A further 10% cut in the supplementary charge from 30% to 20% backdated to January 2015.
· Investment in seismic surveys in the UK Continental Shelf.
· Petroleum Revenue Tax to be cut from 50% to 35%.
· Planned increase in fuel duty frozen.
Tax avoidance measures
· New diverted profits tax from April 2015.
· Businesses no longer allowed to take into account overseas subsidiaries when calculating VAT on overheads.
· Introduction of further measures regarding tax avoidance – criminal offence measures and penalties on those assisting.
· Clampdown on travel expenses for Umbrella company/Agency staff (does not affect genuine self employed).
· EIS/VCT rules to be reviewed to ensure support for genuine start ups/new industries and business growth.
The government will also support new city deals for Aberdeen and Inverness.
There were further measures outlined in the Budget and a fully copy can be downloaded here.
If you would like to discuss any of the measures introduced and how they affect you, do not hesitate to contact us.