March 2014 Budget

The Chancellor billed it “A Budget for Makers, Savers and Doers", which covers most of the business community.  In fact there were few surprises for business which is good.  We had been hoping for an extension to the current level of Annual Investment Allowances and we got an extension and a significant uplift.  In addition the Enterprise Zone reliefs on business rates and Capital Allowances have been extended for 3 more years.  The Seed Enterprise Investment Scheme which gives tax reliefs to investors in small early stage companies which was due to come to an end in 2014 was made permanent. 

On the personal tax front ISAs were simplified and the investment limits increased from July 2014, a Pensioner Bond was introduced and a major (and very welcome) overhaul of defined contribution pension schemes was announced. 

Our Summary of the key proposals

  • 40p income tax threshold to increase to £41,865 from April 2014 and then to £42,285 from April 2015.
  • Annual Investment Allowance (AIA) was doubled to £500,000 and extended to the end of 2015.
  • Anyone using tax avoidance schemes will have to pay disputed bills upfront then claim their money plus interests through the courts.
  • Residential properties bought for more than £500,000 by companies will be liable for 15 per cent stamp duty land tax, and the Annual Tax on Enveloped Dwellings will be extended to cheaper properties.
  • Research and development (R&D) tax credit payable to loss-making SME’s to increase from 11 per cent to 14.5 per cent from April 2014.
  • Export finance doubled to £3 billion with interest rates cut by a third.
  • Cash and shares ISA’s to be combined, with tax-free limit increased to £15,000 from 1st July.
  • Restrictions on pensioners’ access to pension pots removed, taking away requirement to buy annuity.
  • Total pension saving taken as lump sum doubled to £30,000, while taxable part of pension pot taken as cash on retirement to be charged at normal income tax rate.
  • Emergency services workers killed while on duty to be exempt from inheritance tax.
  • Carbon price floor to be capped under £7 billion package of measures to help manufacturers avoid increasing energy costs.

Personal Tax

The 40p income tax threshold will increase from £41,450 to £41,865 from April this year and then by a further one per cent to £42,285 next year.

Rules exempting military services personnel from inheritance tax are to be extended to include people working in the emergency services who are killed while on duty. 

Business and enterprise

In a Budget of relatively few surprises, the Chancellor made the unexpected announcement that the Annual Investment Allowance (AIA) of £250,000 which was only due to last until the end of the year, would be doubled to £500,000 and extended to the end of 2015.

Export finance will be doubled to £3 billion while interest rates on the lending scheme will be cut by a third.

The rate of research and development (R&D) tax credit payable to loss-making small and medium sized enterprises will increase from 11 per cent to 14.5 per cent from April 2014.

Discounts in business rates and enhanced capital allowances in enterprise zones will be extended for three years. 

As previously announced, under 21s will be taken out of employers’ national insurance contributions.

Tax Evasion and Avoidance

Mr Osborne confirmed that those accused of using tax avoidance schemes will have to pay any disputed bills upfront and then go to court if they wish to claim their money back. If successful, they will get their money back, plus interest.

From 20th March 2014, residential properties bought for more than £500,000 by companies (through ‘corporate envelopes’) will be liable for 15 per cent stamp duty land tax.

Pensions, savings and benefits

Cash and shares ISAs will be merged to create a new single ISA from 1 July 2014, with the annual tax-free limit increasing to £15,000 (£4000 for junior ISA’s).

The chancellor also announced that restrictions on pensioners’ access to their pension pots will be removed, meaning they will not have to buy annuity. The total pension saving which can be taken as a lump sum will be doubled to £30,000, while the taxable part of a pension pot taken as cash on retirement will be charged at the normal income tax rate, rather than 55 per cent.

The cap on Premium Bonds will be raised from £30,000 to £40,000 from June this year, increasing to £50,000 in 2015.

Mr Osborne also outlined a new Pensioner Bond, available to all over-65s from January 2015 with interest rates of 2.8 per cent for one-year bonds and four per cent for three-year bonds.

The 10p starting rate of tax will abolished completely.

The welfare budget will be capped at £119 billion for 2015/16, rising in line with inflation to £127 billion in 2018/19. This covers child benefit, incapacity benefit, winter fuel payments and income support but does not affect the state pension or jobseeker’s allowance.

Homes and infrastructure

The Chancellor confirmed a raft of new infrastructure projects, including the previously announced garden city to be built at Ebbsfleet, £140 million funding for flood defence repairs following the wettest winter on record, a £270 million guarantee for the Mersey Gateway Bridge and £200 million funding to fix pot holes.

He also announced that the Help to Buy scheme will be extended to 2020.

Energy and the environment

The carbon price floor will be capped as part of a £7 billion package which Mr Osborne said would ensure manufacturers avoided rising energy costs.

Duty

Once again, Mr Osborne announced that September’s planned fuel duty rise had been cancelled.

Scrapping the alcohol duty escalator, the Chancellor said that alcohol duty would rise in line with inflation, with the exception of Scotch whisky and other spirits, and ‘ordinary’ cider, duty on which will be frozen.

Beer duty will again be cut by 1p – a move Mr Obsborne first introduced last year.

Tobacco duty will rise by two per cent above inflation, with this escalator to be extended into the next Parliament.

The chancellor also announced that all long-haul flights would carry the lower rate of air duty charged on current flights to the US.