George Osborne presented the final Budget of this Parliament on Wednesday 18 March 2015. We have summarised the issues likely to affect you, your family and your business . . . .
The personal allowance will be increased to £10,600 for the 2015/2016 tax year. This will be reduced by £1 for every £2 you earn over £100,000. So if your earnings are above £121,200 you will not be entitled to any personal allowance.
From 6 April 2015 married couples and civil partners may be eligible for a new Transferable Tax Allowance. The option to transfer will be available to couples where neither pays tax at the higher or additional rate. If eligible, one partner will be able to transfer 10% of their personal allowance to the other partner which means £1,060 for the 2015/16 tax year. This could mean a tax saving of up to £212. Eligible couples can now register their interest for marriage allowance at GOV.UK/marriageallowance.
Individual Savings Accounts (ISAs)
On 1 July 2014 ISAs were reformed and the overall annual subscription limit for these accounts was increased to £15,000 for 2014/15. From 6 April 2015 the overall ISA savings limit will be increased to £15,240.
The government has announced the introduction of a new type of ISA, the Help to Buy ISA, which will provide a tax free savings account for first time buyers wishing to save for a home. The scheme will provide a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings.
Capital Gains Tax (CGT) annual exemption
The CGT annual exemption will increase to £11,100 for 2015/16.
Annual Investment Allowance (AIA)
The 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 annual amount of the AIA was increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015.
Class 2 National Insurance contributions (NIC)
From 6 April 2015 liability to pay Class 2 NIC will arise at the end of each year. Currently a liability to class 2 NIC arises on a weekly basis. The amount of Class 2 NIC due will still be calculated based on the number of weeks of self-employment in the year, but will be determined when the individual completes their self assessment return. It will therefore be paid alongside their income tax and Class 4 NIC. Those with profits below a threshold will no longer have to apply in advance for an exception from paying Class 2 NIC. Instead they will have the option to pay Class 2 NIC voluntarily at the end of the year so that they may protect their benefit rights.
Employer National Insurance contributions (NIC) for the under 21s
From 6 April 2015 employer NIC for employees under the age of 21 will be reduced from the normal rate of 13.8% to 0%. For the 0% rate to apply the employee will need to be under 21 when the earnings are paid. This exemption will not apply to earnings above the Upper Secondary Threshold (UST) in a pay period. The weekly UST is £815 for 2015/16 which is equivalent to £42,385 per annum. Employers will be liable to 13.8% NIC beyond this limit.
NIC Employment Allowance
The Employment Allowance was introduced from 6 April 2014. It is an annual allowance of up to £2,000 which is available to many employers and can be offset against their employer NIC liability.
The government will extend the annual £2,000 Employment Allowance for employer NIC to householders who employ care and support workers. This will come into effect from 6 April
These are some of the main changes announced in the Budget. If you would like to discuss how they may affect you or your business, please call
Mark Franklin, Director at Franklin and Co Accountants, on 01305 831742.