The Chancellor announced his 2014 Budget on 19 March 2014. The following are some of the major announcements which are relevant to the self employed and small business:
The personal allowance threshold is due to increase to £10,000 from 6 April 2014 and then to £10,500 from April 2015. This will then align with the age related allowance (up to 75).
The 40% tax rate is reached in the 2014-15 tax year when income is £41,865 and will be £42,285 for 2015-16.
Capital Gains Tax
The annual exemption from capital gains tax is currently £10,900, and it will increase to £11,000 for the 2014-15 tax year.
From April 2016, class 2 NI will be collected through Self Assessment, rather than being paid as a separate direct debit on either a monthly or six monthly basis.
Capital expenditure (excluding cars and buildings) can benefit from 100% tax relief under the Annual Investment Allowance (AIA). The threshold for expenditure is currently £250,000. It will be raised from April 2014 to £500,000 until 31 December 2015, when it is due to revert to £25,000.
Following a report on employee benefits and expenses by the Office of Tax Simplification (OTS), the Government will consult on four simplifications with a view to introducing legislation in 2015:
- Abolishing the £8,500 threshold for the taxation of benefits in kind,
- Introducing a statutory exemption for trivial benefits,
- Introducing a system of voluntary pay rolling for benefits in kind,
- Replacing the expenses dispensation regime with a reimbursed expenses exemption.
The VAT registration threshold will increase from £79,000 to £81,000.
The Government will consult on powers that will enable HMRC to recover funds directly from the bank accounts of individuals who owe over £1,000 in tax or tax credit overpayments. HMRC will only be able to take money from individual’s accounts where they have the ability to pay i.e. the individual will be left with a balance of £5,000 in the account after the recovery action. Legislation will be in the 2015 Finance Bill.