The Annual Investment Allowance (AIA) provides a 100% tax write off for the cost of most plant and machinery acquired by businesses, a notable exception being motor cars. This allowance was temporarily increased to £250,000 on 1 January 2013 and was due to reduce back down to just £25,000 on 1 January 2015. The Chancellor has announced that the allowance will be increased to £500,000 per annum for expenditure incurred between 1 April 2014 and 31 December 2015 (the change takes effect from 6 April 2014 for unincorporated businesses). Remember that the AIA is available for assets bought on hire purchase as well as those bought for cash. It can also be claimed in respect of fixtures and fittings within buildings. Contact us to help you maximise tax relief for capital expenditure, as the timing of expenditure can be critical.
This new scheme, which starts in Autumn 2015, was originally announced in 2013 as being worth up to £1,200 per child. It has now been announced that the Government support will be even more generous with the limit being increased to £2,000 per child per year. The parents will be required to open a special childcare account. If for example they pay in £8,000, the Government will top this up to £10,000 (like pension contributions and Gift Aid) which can then be used to pay their childcare provider. It is not just parents who will be able to pay into the childcare account but grandparents and other family members will also be able to contribute to the childcare costs. To qualify, both parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year.
Unlike the existing employer-provided childcare voucher scheme which is only available to employees and directors, this new scheme will also be available to the self-employed. Those in existing employer provided schemes have the option of staying in their employer scheme (up to £55 a week free of tax and NIC) or switching to the new scheme. To support newly self-employed parents, the government is introducing a ‘start-up’ period. During this, self-employed parents won’t have to earn the £50 a week minimum income.
It was originally proposed that the new scheme would be phased in, initially only applying to children under 5 and gradually extended to those under 12. It is now proposed that children under 12 will be eligible from the outset. If your circumstances change or you no longer want to pay into the account, you’ll be able to withdraw the money you have built up. If you do, the Government will withdraw its corresponding contribution.
The 20% basic rate band is £31,865 for 2014/15 and will be £31,785 for 2015/16. This means that you pay 40% tax if your taxable income exceeds £41,865 for 2014/15 and £42,285 for 2015/16.
The 45% top rate continues to apply to taxable income over £150,000 for 2014/15.
It had already been announced that the CGT annual exempt amount would increase to £11,000 for 2014/15 and £11,100 for 2015/16. With a top CGT rate of 28%, this allowance potentially saves just over £3,000 a year, or £6,000 for a married couple.
There has been no change in the inheritance tax nil rate band, which remains at £325,000 until 2018.
Please contact us if you wish to discuss capital gains tax and inheritance tax planning, as we can help you take advantage of these valuable allowances.
The only significant change to inheritance tax is the proposed extension in the exemption that applies to the military who die on active service to those in the emergency services.
In order to encourage savers, the current £11,520 ISA limit is to be significantly increased to £15,000 from 1 July 2014. Furthermore, the current 50% cash ISA limit of £5,760 is to be abolished so that any combination of cash and stocks and shares can be held within the ISA wrapper up to the overall £15,000 limit. These products will be termed “New ISAs” or NISAs. The Junior ISA limit will increase to £4,000 from 1 July 2014.
Class 2 NIC for the tax year 2014/15 is charged at the rate of £2.75 per week. It is possible for those with earnings below the small earnings limit of £5,885 (for 2014/15), to apply for the small earnings exception using form CF10.
Some taxpayers are both employed and also self-employed and so will have a PAYE code. From April 2014, HMRC can collect outstanding Class 2 NIC by adjusting the PAYE tax code. If a Class 2 National Insurance contributions debt is being collected through a tax code, HMRC will have written to the taxpayer earlier in the year requesting payment. If you do not want your Class 2 National Insurance contributions debt to be included in your tax code, then you will need to pay the amount due in full.
|01 May||Corporation tax for year to 31/7/13|
|19 May||PAYE & NIC deductions, and CIS
return and tax, for month to 5/5/14
(due 22 May if you pay electronically)
|01 June||Corporation tax for year to 31/8/13|
|19 June||PAYE & NIC deductions, and CIS
return and tax, for month to 5/6/14
(due 22 June if you pay electronically)
For every £2 that your adjusted net income exceeds £100,000 the £9,440 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.
Higher rate taxpayers should make any charitable payments under Gift Aid so that you obtain additional tax relief. The charity will also be able to reclaim the basic rate tax from HMRC. Note also that Gift Aid can be carried back for relief in the previous tax year.
Have you used your 2013/14 annual exemption of £10,900? Consider selling shares where the gain is less than £10,900 before 6 April 2014. Also, if you have any worthless shares consider a negligible value claim to establish a capital loss. You may even be able to set off the capital loss against your income under certain circumstances.
Your maximum annual investment in ISAs for 2013/14 is £11,520 (up to £5,760 of which can be saved in a cash ISA). Your investment needs to be made before 6 April 2014. In addition have you thought about investing for your children or grandchildren by setting up a Junior ISAs or pensions? In the 2013/14 tax year, you can invest £3,720 into a Junior ISA for any child under 18 who does not have a Child Trust Fund.