Budget 2015: A look at the key points

Wednesday, March 18, 2015

A pre-election Budget is a funny thing; it is a self-assured summary of all the things that government has achieved, a blatant pre-election appeal for votes, and has the potential to be a futile set of announcements should the government change shortly thereafter. And it was within this context that George Osborne delivered the 2015 Budget today.

 

It is all about the road from austerity to prosperity, said the Chancellor. So what does that mean to our industry and their client base? The CPAA team picks out some of the key points:

Tax simplification:

  • The abolition of the annual tax return was the big news today – it was billed as a “revolutionary process of tax simplification.” The Chancellor announced a phasing out within five years, with further details on the policy to be published later this year. Without doubt, the devil will be in the detail in terms of how this will all work.
  • On a roll, we will also see class 2 National Insurance Contributions abolished and there will be reforms to class 4 to introduce a new contributory benefit test. Again, await the detail of how this will work later this year.
  • Both tax returns and NICs will have a new payments process – and it’s farewell to paper. The government will consult over the summer on a new digital account process.  

Tax avoidance:

  • We knew it was coming, but the “Google Tax” was firmly on the agenda. New diverted profits tax legislation will be pushed through next week for it to come into effect next month.

  • Promoters of tax avoidance schemes beware. The government will introduce legislation that equips HMRC with permission to issue Conduct Notices to a broader range of professionals under the Promoters of Tax Avoidance Scheme.

  • HMRC has continued to review cases after the Accelerated Payments legislation took effect and consequently will be issuing an additional 21,000 Accelerated Payment Notices over and above the original estimated number.

Personal allowance:

  • As predicted, the Income Tax personal allowance threshold has risen – this will be a popular move for most voters. It will increase to £10,800 in 2016-17 and to £11,000 in 2017-18. Gains will also pass to higher rate taxpayers. The basic rate limit will be £31,900 meaning that the higher rate threshold above which individuals pay income tax at 40% will be increased to £42,700. In 2017-18 the higher rate threshold will be £43,300.

  • If you have agriculture clients, they may benefit from a tax announcement today. The government will provide support to farmers by increasing the period over which they can average their profits for income tax from 2 to 5 years from April next year.

  • A new Personal Savings Allowance comes into effect next year. The government will introduce an allowance from next April that will remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers.

Other changes for employees and employers:

  • The Budget document outlines simplification of employee benefits and expenses. From next month, the government will provide an exemption for trivial benefits in kind costing less than £50. An annual cap of £300 will also be introduced for office holders of close companies and employees who are family members of those office holders. From April 2016, the government will remove the £8,500 threshold below which employees do not pay Income Tax on certain benefits in kind and replace it with new exemptions for certain groups.

  • No big change on business rates, sadly. The government is instead launching a comprehensive review of rates and piloting schemes that reward additional business rates growth – so watch this space.

  • The main rate of corporation tax has been cut from 28% to 21%, and to 20% in April 2015, which is the joint lowest in the G20.

  • The abolition of Employer NICs for under 21 year olds from April 2015 will benefit employers of almost 1.5m young people, by £332 per employee on average. Next year it will be abolished for Apprentices too.

  • No immediate dramatic increase, but minimum wage is set to become more than £8 by the end of the decade.

There we have it, perhaps for another year or potentially less should the political landscape shift. To see the Budget in more detail, you can review the whole document here:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/413949/47881_Budget_2015_Web_Accessible.pdf