The Chancellor delivered his 2015 Budget on Wednesday 18 March 2015. We have reviewed the announcements and highlighted the following which will have a direct impact on small business.
Income Tax
The personal allowance threshold is due to increase to £10,600 from 6 April 2015 and then to £10,800 from April 2016 and to £11,000 from April 2017.
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, £42,700 for 2016-17 and £43,300 for 2017-18.
From April 2016, a tax free allowance of £1,000 (or £500 for higher rate taxpayers) will be introduced for the interest that people earn on savings.
Farmers will be able to average their profits over five years, up from the current two years.
Capital Gains Tax
The annual exemption from capital gains tax is currently £11,000, and it will increase to £11,100 for the 2015-16 tax year.
National Insurance
Given the headline grabbing increases in the personal allowance thresholds, the Government are less keen on increasing National Insurance (NI). Class 1 NI and Class 4 NI for the self-employed will start at £8,060 for the 2015-16 tax year.
However, the Government will abolish Class 2 NI in the next Parliament and will reform Class 4 NI to introduce a new contributory benefit test.
VAT
The VAT registration threshold will increase from £81,000 to £82,000.
And Finally….
The Death of the Tax Return!
HM Revenue and Customs (HMRC) has set out plans to modernize the administration of the UK tax system with the introduction of digital tax accounts. It is anticipated that, in time, they will remove the need for individuals and small businesses to submit annual tax returns.
The digital tax account will be available by early 2016 to five million small businesses and ten million individuals, and will be available to all such taxpayers by the end of the next Parliament. HMRC believe that the main benefits will be as follows:
- Taxpayers will be able to view and manage their tax affairs online in one secure place. If they pay more than one tax (e.g. VAT, PAYE or corporation tax), they will be able to have a view of their total tax liabilities.
- It will no longer be necessary to provide HMRC with information it already holds, such as employment income and bank interest.
- Taxpayers will be given the option to pay their tax ‘as you go’ and to make single payments covering multiple taxes.
Comment
We think that the intent behind this announcement is great, as it will give taxpayers more control over their affairs. It should consolidate a lot of information and (in theory) make things simpler. However, HMRC don’t have a tremendous track record at introducing big initiatives, so we think it will be interesting.
NB all of these announcements have got to go through Parliament, which may prove difficult given that there is a general election in May 2015.