What the budget means for you

Now George Osborne has delivered the final pre-election budget, Hilton Sharp & Clarke Chartered Accountants have put together some of the key points that might affect members:

Key points:

• Personal allowance increases in the tax years ending  5 April 2017 and 2018
• Higher rate threshold increases in the tax years ending 5 April 2017 and 2018
• Gift Aid Small Donation increase from April 2016
• Employee benefit and expense reporting to change
• Digital tax accounts

Personal Taxation

The personal allowance, the amount you can earn tax free, is set at the following amounts:

To 5 April 2016 £10,600
To 5 April 2017 £10,800
To 5 April 2018 £11,000

The higher rate threshold will increase to £42,700 for the year to 5 April 2017 and then to £43,300 for the year to 5 April 2018.

The van benefit charge will increase in line with RPI and the lower rate of the van benefit charge applicable to zero emission vans will be extended to 5 April 2020, on a tapered basis.

The fuel benefit charge for cars and vans will increase in line with RPI.

From April 2015 employees’ trivial benefits in kind costing less than £50 will be subject to a statutory exemption.  There will also be an annual cap of £300 for directors and other office holders of close companies and employees who are family members of those office holders.

Currently there is an exemption for those employees earning less than £8,500 from reporting and paying income tax on certain benefits in kind.  From April 2016 this will be removed.

Another important change to benefit in kind rules is the removal of the dispensation.  This will be replaced with an exemption for certain reimbursed expenses, but details of how this will work are to follow.

Pensions and Savings

With all the recent changes to pensions it is important that if you are about to retire you review your retirement plans with an appropriately qualified advisor.  The Budget also announced another change to the Lifetime Allowance which will be reduced to £1 million from 6 April 2015, the annual allowance remains at £40,000.

Peer-to-Peer lending  (P2P) – this is a new relief for those who lend through P2P.  The relief is that you will be able to offset P2P losses from bad loans against P2P income.  This relief commences from April 2016 and will have to be claimed through self-assessment.

Charities

The maximum annual donation amount that can be claimed through Gift Aid small donations will be increased from £5,000 to £8,000 from April 2016.

Business Tax

As expected the main rate of corporation tax will be 20% from 1 April 2015 and remain at 20% in the year commencing 1 April 2016.

Annual Investment Allowance – as you may have seen on our Twitter and Linked in feeds, the £500,000 annual investment allowance ends 31 December 2015.  It was expected that the allowance would then be £25,000 from 1 January 2016, but it appears we will have to wait until the Autumn 2015 budget to find out if the reduction is going to be less than anticipated.  

Whatever happens on 1 January 2016, it is clear that if you are planning any major capital expenditure you need to check the timing of it now to maximise any annual investment allowance claim you might be entitled to.

The Research and Development credit will rise from 10% to 11% and the SME scheme rate will increase from 225% to 230%.  The changes take effect from 1 April2015

With effect from 4 December 2014 corporation tax relief on goodwill associated with a business that a company acquires from a related individual or partnership, will be restricted.  This also has an effect on Entrepreneurs’ Relief, as individuals will not be able to claim ER on disposals of goodwill on a transfer of business to a related close company.

VAT

From 1 April 2015, the VAT registration threshold rises to £82,000 and the VAT deregistration threshold rises to £80,000.

Digital tax account

Would you be ready to move to digital tax accounts?  During the next parliament it is planned to introduce digital tax accounts for individuals and small businesses, removing the need to complete annual tax returns.

There is still more detail to be issued about digital tax accounts including how the information will be delivered to HMRC and payment of tax and NI will be dealt with and calculated.  

For any additional advice or assistance please contact one of our team at our New Road, Brighton office on 01273 324163 or enquiries@hsc.uk.net

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