Hi everyone, apologies for the delay with my column but I was waiting for the all important Budget! And what an interesting Budget it was.
George Osborne’s 2015 Budget is one aimed towards the individuals. He has targeted savers by announcing tax cuts for first-time buyers, workers and savers in his final Budget before May’s general election.
He started his speech by letting everyone know that “the hard work and sacrifice of the British people has paid off”. According to the Chancellor in the past year the UK economy has grown faster than any other advanced economy in the world and as such the squeeze on public spending will come to an end 1 year earlier than expected in 2019.
Here is a round up of all the key points that will effect you –
PERSONAL TAXATION
The tax-free personal allowance (i.e. the limit at which we all start paying tax) will rise from the current £10,000 to £10,600 in 2015-16 to £10,800 in 2016-17 and to £11,000 in 2017-18.
This will mean tax cuts for 27 million people, making the basic rate taxpayer £80 a year better off in 2015-16.
Workers will start paying 40% tax at £42,385 from April 2015 – a £520 increase from the current £41,865 threshold. This will then increase by £915 to £43,300 by 2017-18. Because the increase in personal allowance is not offset by the usual reduction in the 40% threshold, higher rate tax payers will benefit greatly from this Budget.
End of year tax returns will be scrapped and replaced by real time online accounts by 2020. Individuals and small businesses will have to submit their accounts on a regular basis throughout the year but they will be able to pay their tax at any point throughout the year and in instalments. The switch will start with 5 million small businesses and 10 million individuals in early 2016.
The transferable tax allowance for married couples is to rise to £1,100 from the current £1,050.
Class 2 national insurance contributions for the self-employed are to be abolished in the next Parliament.
SAVINGS
From April 2016, a new personal savings allowance will be introduced. So the first £1,000 of savings income will now be tax-free for basic rate taxpayers and £500 for 40% tax rate payers.
This will, the Chancellor says, create tax-free banking for almost the entire population. People have already paid tax once on their money when they earn it. They shouldn’t have to pay tax a second time when they save it too.
Anyone earning more than £150,000 a year will not receive the benefit of the new savings allowance at all.
NOTE – This change requires the passing of legislation through Parliament, so is not 100% confirmed yet.
The annual savings limit for ISAs will be increased to £15,240 from April 2015.
A fully flexible ISA will allow savers to withdraw money from their ISA and put it back later in the same tax year without losing any of their tax-free allowance. This will only apply to cash ISA’s.
PROPERTY
A new “Help to Buy” ISA for first-time buyers will mean that for every £200 a person saves for a house deposit, the government will top it up by £50.
The monthly maximum contribution from savers will be £200.
The accounts will run indefinitely once opened. But if someone accumulates £12,000 over that time, a maximum of £3,000 will be added by the taxpayer.
Savers will have access to their own money and will be able to withdraw funds from their account if they need them for another purpose, but the bonus will only be made available for home purchase.
The payment of the government bonus will only be triggered if the saver buys a home worth less than £450,000 in London, or less than £250,000 anywhere else.
PENSIONS
The lifetime allowance for pension savings that can be accumulated free of tax will be cut from £1.25m to £1m from April 2016.
There will be no change to the annual allowance for pension savings, which stays at £40,000.
Pensioners will be able to trade in their annuities for cash pots, with the 55% tax charge abolished and tax applied at the marginal rate.
ALCOHOL, TOBACCO & FUEL
Beer duty will be cut by 1p per pint and cider by 2p.
2% cut in excise duty on scotch whisky and other spirits while wine duty frozen.
No changes to tobacco and gambling taxes, with tobacco duties set to rise by 2% above inflation, equivalent to 16p on a packet of 20 cigarettes.
Petrol duty frozen with September’s planned increase cancelled.
CONCLUSION
This overwhelming feeling behind this Budget is that it is for the individual and ultimately to gain the peoples vote in May’s general election. Let us see what happens.
Important dates for your diary – Key dates coming up. Company accounts with a 30 June 2014 year end need to be filed at Companies House by 31 March or a £150 fine will be incurred for late filing! Quarter ended February VAT returns to be filed and paid by 7 April and February PAYE to be paid by 19 March. Don’t forget, your payroll end of year declaration MUST be filed by 19 April or £100 penalty.
I hope you found this article useful. Please remember to interact with me and let me know if you want anything covered in the next article.
My email address is hannah@timeaccounts.co.uk or you can follow my firm on Twitter @timeaccounts or visit our business Facebook page (Facebook/timeaccounts). Remember to like our page so you can keep on top of tax saving tips, deadlines and general Time Accounts updates.
See you next month. New Years column coming Thursday 9 April 2015!
Time Accounts t/a Time Business Services are a local Sussex based chartered accountancy practice dealing with all aspects of small, medium enterprises and their financial requirements, so just pick up the phone and call 01273 446595 or send us a call back request via our website Time Accounts and we’ll do the rest.
