Chancellor George Osborne unveiled a series of significant measures affecting businesses and individuals in his 2014 Budget. Here we outline some of the highlights from the Budget Statement.
Annual Investment Allowance (AIA)
The maximum amount of the AIA has been increased from £250,000 to £500,000 for all qualifying expenditure on plant and machinery made from 1 April 2014 for corporation tax and 6 April 2014 for income tax. After 31 December 2015 the limit will be reduced to £25,000. Transitional rules will apply.
Enhanced capital allowance (ECA)
The period in which businesses investing in new plant and machinery in ECA sites in Enterprise Zones can qualify for 100% capital allowances has been extended by three years to 31 March 2020.
Research and development (R&D)
From 1 April 2014 the rate of R&D payable credit for loss making SMEs will be increased from 11% to 14.5%.
Seed Enterprise Investment Scheme (SEIS)
The SEIS and the associated capital gains tax relief for re-investing chargeable gains in SEIS shares are to be made permanent.
Capital gains tax (CGT)
Roll-over relief allows capital gains tax and corporation tax on chargeable gains to be deferred where the proceeds from disposing of certain eligible classes of qualifying asset are reinvested into new qualifying assets.
A new measure will prevent companies claiming chargeable gains roll-over relief on the disposal of tangible assets where the proceeds are reinvested in an intangible fixed asset.
Allowances and rate bands
The Chancellor announced that from 6 April 2015:
- the personal allowance for all those born after 5 April 1948 will be £10,500
- the basic rate limit will be reduced to £31,785
- the starting rate of savings tax will be 0% and will apply to a maximum of £5,000
The Chancellor announced a series of changes, in order to:
- increase the maximum income that a drawdown pensioner with a capped drawdown pension fund can choose to receive, to 150% of the ‘basis amount’
- reduce the minimum income threshold for flexible drawdown to £12,000
- allow members over 60, with total pension savings of £30,000 or less to take out all of those savings as one or more trivial commutation lump sums, and
- increase the size of a small pension pot which can be taken as a lump sum from £2,000 to £10,000 and the number of personal pension pots that can be taken as a lump sum under the small pot rules from two to three.
The New ISA
From 1 July 2014, ISAs will be reformed into the ‘New ISA’ (NISA). From that date all existing ISAs will become NISAs, and the overall annual subscription limit for these accounts will be increased to £15,000 for 2014/15.
ISA savers will be able to subscribe this full amount to a cash account and will also be able to transfer their investment from a stocks and shares to a cash account and vice versa.
High value residential property
The Government will introduce two new bands for the Annual Tax on Enveloped Dwellings (ATED). Residential properties worth over £1m and up to £2m will be brought into the charge with effect from 1 April 2015. The charge for these properties in 2015/16 will be £7,000. Properties worth over £500,000 and up to £1m will be brought into the charge with effect from 1 April 2016. The charge for these properties in 2016/17 will be £3,500.
Please contact us to discuss how the measures announced in the Budget may affect you and your business.