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Budget 2015

“Britain is walking tall again”

Chancellor George Osborne used his final Budget statement of this Parliament to announce that “Britain is walking tall again”.

He reminded us of the the many things to be positive about, but what are the key factors that could affect your business?

Income Tax

  • The income tax personal allowance will increase from £10,000 to £10,600 with effect from 6 April 2015, £10,800 next year and £11,000 the year after, making typical working taxpayer £900 a year better off and cutting tax for 27m people.
  • The basic rate band will decrease from £31,865 in 2014/15 to £31,785 in 2015/16. This means that the higher rate threshold above which individuals pay income tax at up to 40% will however increase from £41,865 to £42,385.
  • Transferable tax allowance for married couples to rise to £1,060 for 2015/16.
  • Mr Osborne says he wants to eventually raise tax free allowance to £12,500 and 40p rate to £50,000.

Self Assessment Tax Returns

  • Are to be abolished all together in favour of real time online digital tax accounts.
  • The switch will start early in 2016 and is expected to complete by 2020.
  • According to Mr Osborne, people will be able to manage their account online and pay tax as they go using their computers, tablets and smartphones.
  • In his speech, Mr Osborne announced that the information needed will be ‘automatically received’. Businesses and individuals will be able to link their own accounting software and their bank accounts to the digital tax account, removing the need to submit an end-of-year return and paying an annual tax bill in one go.
  • There are many practical implications with the proposed changes – further articles to be released on this subject as details emerge.

Business Tax

  • No change to small business tax rates  – Corporation Tax remains at 20%.
  • R&D tax credits scheme to be simplified for small businesses making their first claim from autumn 2015.
  • The unpopular proposed reduction in the annual investment allowance from £500,000 to £25,000 after 31 December 2015 is to reviewed. It is likely that the limit will be greater than £25,000.

VAT

  • The taxable turnover threshold, which requires a person to register for VAT, will be increased from £81,000 to £82,000 per year from 1 April 2015.
  • VAT rates remain unchanged, so the standard rate is 20% and the reduced rate is 5%.

Jobs

  • National Minimum Wage will rise by 20p an hour to £6.70 from October 2015.
  • Minimum wage to rise to £8 by the end of the decade.
  • The simplification of employee benefits and expenses means that trivial benefits in kind of less than £50 no longer need to be reported from 6 April 2015. Dispensations will no longer be required from 6 April 2016.  Some taxable benefits to be paid and reported real time through payroll from 6th April 2016 reducing the P11D burden.
  • There are still many practical implications with the proposed changes – further articles to be released on this subject as details emerge.

National Insurance

  • Class 2 national insurance contributions for self-employed to be abolished in next Parliament.
  • Employers national insurance for under 21’s abolished from this April and for young apprentices from next April.

Company Car Tax Rates

  • Changes have previously been announced to increase the appropriate percentages for calculating the benefit charges for cars in 2017/18 and 2018/19. The maximum percentage for cars for 2015/16 is 37%.
  • For more details: Calculate tax on company cars
  • The van benefit charge for zero emission vans has been increased from £0 to 20% of the van benefit charge for vans that omit CO2 in 2015/16.

Entrepreneurs Relief

  • As of 18 March 2015  – in order for the disposal of a privately owned asset used in a business carried on by a company or partnership to qualify for entrepreneurs’ relief, the claimant must reduce their participation in the business by also disposing of a minimum of 5% of the shares of the company,
  • The government has allowed gains which are eligible for entrepreneurs’ relief, but which are instead deferred into investments which qualify for the Enterprise Investment Scheme EIS) or Social Investment Tax Relief (SITR) to remain eligible for entrepreneurs’ relief when the gain is realised.

For further details, please download our full Budget 2015 article.

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