Budget Update 2014

George Osborne announced his 2014 budget on 19 March 2014. It was quite a mixed bag for businesses, giving better access to pension pots for individuals and increases in eligible childcare costs for families in receipt of the UniversalCredit by 21%.

Other updates announced in the budget for :-

INDIVIDUALS

–  Personal Allowance 2014/15 £10,000 2015/16 £10,500

–  Class 2 NIC’s to be moved to self assessment wef 5/4/16

–  ISA’s merged limits to £15,000 will be known as NICA’s wef 1/7/14

–  Inheritance Tax starting rate remains at £325,000 ’till 2017/18

BUSINESSES

–  Annual investment allowance doubled to £500,000 ’till 31/12/2015

–  Increases in company car tax rates (regular readers will note that I wrote about this in June 2013)

–  VAT threshold increased for registration to £81,000

–  Rollover relief and SEIS made permanent.

To analyse in further detail the basic rate band in 2014/15 will cease at £31865, tipping into higher rate at 40% up to £150,000. In the tax year 2013/14 the basic rate band now ceases at £32010.   This is a decrease for basic rate tax payers, in a climate which the government want to ensure an individual earns a “living wage”.   Assistance in this area would have been a better incentive to encourage people back to work and ensure the living wage can be earned at less of a burden to small and medium size businesses.

Class 4 NIC’s kicks in on earnings for the self employed currently at £7,755 for 2013/14 raising to £7,956 in 2014/15. An increase in the earnings they can earn before a 9% tax by 2%.

The movement of Class 2 NICs to self assessment will mean that fewer people will drop through the net in paying this tax. The class 2 rate will increase in 2014/15 to £2.75 per week. An increase of 2%.

Incredibly the income limit for which the personal allowance starts to be eradicated remains at £100,000.   No increase for higher earners. The highest tax rate for individuals was 50% in 2012/13 for earnings over £150,000. But now the highest tax rate for individuals is 45%.

The minimum wage is currently £6.31 per hour for over 21s. The rate will increase on 1/10/2014 and according to speculation George Osborne has indicated that it may go up by as much as 10% (http://www.xperthr.co.uk/blogs/pay-intelligence/2014/02/national-minimum-wage-do-you-support-the-potential-above-inflation-increase-for-20142015).

Businesses will have no alternative but to pass on this additional cost by increasing sales prices to the public. Cost cutting measures will damage a quality service currently provided by small & medium size businesses, leaving only the large corporations in business.

There is much to HMRC’s legislation and it is advisable you seek the advice of a qualified appropriate accountant.