Chancellors Statement 2014

Chancellors 2014 Statement

The Chancellor has now delivered his Statement to Parliament, and the main announcements which will affect HM Revenue & Customs (HMRC) customers are highlighted below.

Personal Tax/Benefits and Credits

For the tax year 2014-15 the Personal Allowance will increase to £10,000 and the basic rate limit will be set at £31,865.

For 2015-16 the personal allowance will be increased to £10,500.

The basic rate of tax is currently 20%. For 2014/15 the band of income taxable rate is being reduced from £32,010 to £31,865 so that the threshold at which the 40% band applies will rise from £41,450 to £41,865 for those who are entitled to the full basic personal allowance.

The additional rate of tax of 45% is payable on taxable income above £150,000.

For 2014-15, there are no changes to the percentage rate of contribution for Class 1 and Class 4 National Insurance contributions (NICs) but there are changes to all of the thresholds and limits.

Business Tax

The Chancellor announced that the rate from 1 April 2014, will be reduced by an additional 1% to 20%.

The small company rate will therefore remain at 20%.

Research and Development (R&D) Relief

Following consultation, legislation will be introduced to provide an 'Above the Line' (ATL) credit scheme to further encourage R&D investment by large companies. The aim of the ATL scheme is to increase the visability of large company R&D relief and provide greater cashflow support to compnaies with no corporation tax liability.

The ATL scheme will initially be optional but will become mandatory on 1 April 2016. Until this time eligible companies that do not elect to claim the ATL credit will be able to continue to claim R&D relief under the current scheme which provides for an additional 30% deduction of any qualifying expenditure to reduce chargeable profits (or increase a loss) but which does not permit a payable credit.

Exemption Threshold for Employment-Related Loans

Where an employer provides an employee with a cheap or interest free loan they have to report notional interest on the loan at 4% per annum on the form P11D. Where the balance of the loan is no more than £5,000 throughout the tax year no benefit is reportable.

The exemption applies if the total balance, at any point in the tax year, does not exceed the limit of £5,000 and includes the total of low cost, or interest free, loans or notional loans arising from the provision of employment-related securities.

From 6 April 2014 where the total outstanding balances on all such loans do not exceed £10,000 at any time in the tax year there will not be a tax charge and employers will no longer be required to report the benefit to HMRC.

National Insurance - £2,000 employment allowance

The Government will introduce an allowance of £2,000 per year for all businesses and charities to be offset against their employer Class 1 NIC liability from April 2014. The allowance will be claimed as part of the normal payroll process through Real Time Information (RTI).

The Government will engage with stakeholders on the implementation of the measure after the Budget and is seeking to introduce legislation later in the year.

IHT Nil Rate Band

It had been intended to leave the IHT nil rate band frozen at £325,000 until 5 April 2015. The band will now remain at that level until 5 April 2018.

In calculating the IHT liability on an estate the value of assets is reduced by any liabilities owed by the deceased at the date of death. These provisions are being abused by some tax avoidance schemes and so the rules will be tightened to prevent this abuse.