PFL ACCOUNTANCY Chartered Certified Accountants VOLUME 10, ISSUE 1 NEWSLETTER DATE: 5 APRIL 2014 BUDGET NEWSLETTER  The following Personal: Information is based From 06/04/2014 personal allowance increased from £9,440 to £10,000 per year on proposals set out From 06/04/2015 personal allowance increased from £10,000 to £10,500 per year by the Chancellor in From 06/04/2013 cap on tax reliefs. Anyone seeking to claim more than £50,000 of these reliefs will have them capped at 25% of income or £50,000, which ever is the greater. his budget of 19 March 2014 but is Child benefit: subject to With effect of 07/01/2013 income over £60,000 this benefit is being withdrawn amendment in the For income between £50,000 and £60,000 there will be a claw back of 1% per every £100 of income above £50,000, this will be collected by pay as you earn and selfassessment Finance Bill. Business: From 01/04/2013 the main company rate of corporation tax will be 23% and from 01/04/2014 will be 21% then from 01/04/15 will be 20%. From 01/04/2011 the small company rate of corporation tax will be 20% Inside this issue: Key Changes 1+2 Tables 3 Tables 4 Tables 5 Summary 6 From 01/01/2013 capital allowance for annual investment allowance of 100% of expenditure up to £250,000 until 31/03/2014. Then from 01/04/2014 up to 31/12/2015 expenditure of £500,000 From 01/04/2012 the capital writing down allowances will reduce from 20% to 18% and from 10% to 8% From April 2014, all businesses and charities will be eligible for an employment allowance of £2,000 per year to set against employer Class 1 National Insurance contributions. It is intended that this will be administered through the normal payroll process. Taxwise insurance investigation scheme which also involves free employment law and HR advice is due for renewal on 1 June 2014. The tax yield derived from HM Revenue & Customs investigations into the affairs of small and medium sized companies rose by 31% over the last 12 months, according to UHY Hacker Young. Further HMRC have also ramped up compliance activity with the launch of 40 specialist taskforces aimed at extensive investigations into businesses and individuals. Would all clients that may be interested in entering into such a scheme please contact the office and further details will be provided. VOLUME 10, ISSUE 1 PAGE 2 Individual saving account (ISA) changes These changes will take effect from 01/07/2014 The annual subscription limit for cash ISA’s and stocks/shares ISA’s is to be equalised at £15,000. the restrictions on the transfer of funds between stocks and shares and cash accounts are to be removed. Consequential changes will be made concerning the securities and other investments that can be held in an ISA. Core capital deferred shares issued by a building society will also be eligible for investment in an ISA and child trust fund (CTF). The annual subscription limit for junior ISA and CTF will be increased from £3,840 to £4,000. Medical treatment From a date to be set out in a Treasury Order, legislation will exempt from income tax any benefit in kind or payments of earnings, up to an annual cap of £500 per employee, when an employer meets the cost of ‘recommended’ medical treatment. Treatment is recommended where it is provided in accordance with a recommendation from an occupational health service in order to help an employee return to work after a period of absence due to ill-health or injury. It is proposed to apply where the employee has been unfit for work for a minimum number of days. There will be a corresponding national Insurance contributions disregard introduced in regulations after Royal Assent to Finance Act 2014. Pensions A number of measures are to be introduced to ease some of the restrictions applicable on the amounts which can be withdraw from registered pension schemes:  Currently a member aged over 60 and whose rights under all registered pension schemes are less than £18,000 may be paid a lump sum of up to £2,000 in settlement of all his rights under the scheme under the ‘trivial communication’ rules. It is proposed to increase this upper limit to £30,000 for commutation periods beginning on or after 27 March 2014 and allow all of those savings to be withdrawn as a tax-free lump sum.  A similar commutation applies in respect of small pension pots and, currently a lump sum of up to £18,000 in situations where the trivial commutation rules would not apply solely because an annuity was in payment and thus all of the member’s rights would not be extinguished. This limit is also to be increased to £30,000 from 27 March 2014. In the case of other small pension pots, tax-free commutation is permitted provided the payment does not exceed £2,000; this threshold is to be raised to £10,000, again from 27 March 2014. Only two payments are permitted under these regulations but it is proposed to increase this limit to three.  A pensioner is allowed to ‘drawdown’ income from his pension fund of up to 120 per cent of the relevant annuity which could have been purchased by that fund. This percentage is to be increased to 150 per cent for pension years starting on or after 27 March 2014.  Other individuals may qualify for ’flexible drawdown’ which permits them to drawdown unlimited amounts from their fund, provided they have a minimum income from other sources of at least £20,000. that income requirement is to be reduced to £12,000 for individuals who apply for flexible drawdown on or after 27 March 2014. In addition to these immediate changes, the Government have issued a consultation document , Freedom and choice in pensions, on the proposal to remove the current (and penal) unauthorised payments charge and unauthorised payments surcharge. Together these impose a 55 per cent tax rate on any lump sums withdrawn from a registered pension scheme in excess of the permitted tax -free lump sum of one-quarter of the fund. The intention is to allow pensioners greater choice and not be obliged to purchase an annuity with the remaining three-quarters of the fund. It is proposed that any amounts withdrawn in excess of the tax-free lump sum will be taxed as income at the individual’s marginal rates. The consultation closes on 11 June 2014 and the resulting legislation is intended to apply from April 2015. VOLUME 10, ISSUE 1 PAGE 3 Income tax rates 2014/2015 2013/2014 Starting savings rate – 10% £0 - £2,880 £ 0- £2,790 Basic rate – 20% £0 - £31,865 £ 0- £32,010 Higher rate – 40% £31,866 - £150,000 £32,011-£150,000 Additional rate – 45% Over £150,000 Over £150,000 Corporation tax Main allowances and reliefs Allowance/Relief 2014/2015 2013/2014 Personal Year ending Year ending 31/3/2015 31/3/2014 Age up to 64 £ 10,000 £ 9,440 Standard rate 21% 23% Age 65-74 £ 10,500 £ 10,500 Marginal relief fraction 1/400 3/400 Age 75 and over £ 10,660 £ 10,660 Small companies rate 20% 20% Income limit for un- £100,000 der 65 personal allow- £100,000 On profits £ 0-£ 300,000 £ 0-£ 300,000 Marginal relief for profits £ 300,001£ 1,500,000 £ 300,001£ 1,500,000 Married couple’s Age 75 and over £ 8,165 £ 7,915 Married couples allowance-minimum allowance £ 3,140 £ 3,040 Income limit– age allowance £ 27,000 £ 26,100 Blind person £2,230 £ 2,160 Payment on loss of office £30,000 £30,000 Value added tax Period starting Period ending 01/04/2014 01/04/2013 Standard rate 20.0% 20.0% Reduced rate 5% 5% Enterprise investment £1,000,000 @ 30% scheme £ 1,000,000 @ 30% VAT fraction 1/6 1/6 £81,000 from £79,000 from Venture capital trusts £ 200,000 @ 30% £ 200,000 @ 30% Registration threshold 01/04/2014 01/04/2013 ISA’s - overall limit £11,520 Deregistration threshold £79,000 from £77,000 from 01/04/2014 01/04/2013 Cash and annual accounting scheme-max turnover £1,350,000 million £1,350,000 million Flat rate schememax turnover £150,000 £150,000 £11,880 (Increases to £15,000 from 01/07/2014) ISA’s - cash limit ISA’s - junior limit £5,940 £3,840 (Increases to £4,000 From 01/07/2014) £5,760 £3,720 VOLUME 10, ISSUE 1 PAGE 4 Inheritance tax 2014/2015 2013/2014 £ Nil to £ 325,000 Nil Nil Death rate on excess over £325,000 40 % 40 % Lower death rate where 10% or more of the deceased 36% 36% Annual exemption £ 3,000 £ 3,000 Small gifts to any one person £ 250 £ 250 person’s net estate is left to charity Relief on gifts made within 7 years of death: Years before death 0-3 Death charge percentage 100% 3-4 4-5 5-6 6-7 80% 60% 40% 20% Working and Child Tax Credits Working tax credit 2014/2015 change 2013/2014 Basic element £1,940 +£20 £1,920 Couple and lone parent element £1,990 +£20 £1,970 30 hour element £800 +£10 £790 Disabled worker element £2,935 + £80 £2,855 Severe disability element £1,255 +£35 £1,220 Maximum eligible cost for one child £ 175 PW - £ 175 PW Maximum eligible cost for two or more children £ 300 PW - £ 300 PW Percentage of eligible cost covered 70% - 70% Family element £ 545 - £ 545 Child element £2,750 + £30 £2,720 Disabled child element £3,100 + £85 £3,015 Severely disabled child element £1,255 + £35 £1,220 First income thresholds £ 6,420 - £ 6,420 First withdrawal rate (per cent) 41% - 41% Threshold for those entitled to CTC only £16,010 + £100 £15,910 Income disregard £ 5,000 - £ 5,000 Income fall disregard £2,500 - £2,500 Childcare element of the working tax credit Child Tax Credit Income thresholds and withdrawal rates VOLUME 10, ISSUE 1 PAGE 5 National insurance contributions 2014/2015 Class 1-employed (contribution table letter A) Lower earnings limit (LEL) -£ 111 per week Earnings threshold (ET) - employers and employees £153 per week Upper earnings limit (UEL) - £ 805 per week- employees only Upper accruals point (UAP) - £ 770 per week Earnings Employees Employee Employer Below £ 111 weekly or Nil Nil 0% 0% 12% on earnings above PT 13.8% on earnings above ST 12% on earnings above PT 13.8% on earnings above ST 12% on earnings above the PT, up to and including the UEL, then 2% on all earnings above the UEL 13.8% on all earnings above ST Below £ 481 monthly or Below £ 5,772 yearly £ 111 to £ 153 weekly or £ 481 to £ 663 monthly or £ 5,772 to £ 7,956 yearly £ 153.01 to £ 770 weekly or £ 663.01 to£ 3,337 monthly or £ 7,956.01 to £ 40,040 yearly £ 770.01 to £ 805 weekly or £ 3,337.01 to £3,489 monthly or £40,040.01 to £41,865 yearly Over £805 weekly or Over £3,489 monthly or Over £41,865 yearly Contracted out rates: Reduced rates and rebates apply to earnings between the lower earnings limit and the upper earnings limit. CLASS 1A (EMPLOYERS ONLY): 13.8% based on taxable benefits CLASS 1B (EMPLOYERS ONLY): 13.8% in respect of amounts in PAYE settlement agreements. CLASS 2-SELF EMPLOYED FLAT RATE: £ 2.75 per week if earnings are over £ 5,885 pa. CLASS 3-VOLUNTARY: £ 13.90 per week. CLASS 4-SELF EMPLOYED RATE: 9% on profits between £ 7,956 and £ 41,865 pa. 2% above £ 41,865. Child benefit (£ per week) From From 06/04/2014 06/04/2013 Eldest child £20.50 £20.30 Other children £13.55 £13.40 Guardians allowance £16.35 £15.90 PAGE 6 VOLUME 10, ISSUE 1 Capital gains tax Rates Reliefs Companies: Gains charged to corporation tax rate. Individuals: Gains up to the basic rate limit 18%. Then above the basic rate limit 28%. The entrepreneurs relief (lifetime limit of gains) 2014/2015 of £10 million on lifetime gains will reduce the effective tax rate to 10%. 2014/2015 2013/2014 Individuals £ 11,000 £ 10,900 Most trusts £ 5,500 £ 5,450 Chattels exemption £ 6,000 £ 6,000 Annual exemption General The filing date for self-assessment paper tax returns for 2013/2014 will be 31 October 2014. The filing date for those tax returns filed on-line will remain 31 January 2015. The adult minimum wage rose from £6.19 to £6.31 on the 01/10/2013. PFL ACCOUNTANCY Chartered Certified Accountants The business has a website (www.pflaccountancy.co.uk) which contains a copy of this budget newsletter for all clients to view. It is our intention to maintain the website in between the publishing of our annual newsletter, so as to keep all clients informed of any future changes to legislation. Suite K 113 Old Street Ashton-under-Lyne Lancashire OL6 7RL Phone/fax: 0161 343 7534 Mobile: 0783 4878101 Email: [email protected] Web: www.pflaccountancy.co.uk The organisation has now been in existence for ten years, we are a family business that aims to provide an efficient and cost effective service to all our clients on a friendly but professional basis. We can provide our clients with the numerous services as listed below:   Business Start up and planning Accountancy for family businesses, sole traders, partnerships and limited companies  Sage payroll services  Sage book-keeping and vat  Personal and corporate taxation services   Self assessment and construction industry reclaims Management accounts and cash flows Additional services such as Financial Advisory services can be provided by: Gudger & Singleton Financial Services LLP. Including:  Personal pensions  Company pensions Company formation  Life and health insurance Probate advice  Building and contents insurance  Inheritance tax planning  Investment advice  Company secretarial services  