Archive for category: Annual Investment Allowance

You are here: / Annual Investment Allowance
George Osborne

Summer Budget 2015 – Key Tax Takeaways

/in , , , , , , , , , /by

The Summer Budget was announced last week and in this blog post we’ll take a look at only those changes which will affect ordinary taxpayers and SMEs.

In his opening remarks, the Chancellor of the Exchequer, George Osborne, promised:

A Budget … to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country.

So, taking each of those goals in turn …

Higher Minimum Wages

With regard to the higher wages promise, Osborne announced that there would be a new National Living Wage of £7.20 per hour from April 2016 for those aged over 25 and over, rising to more than £9 per hour by the year 2020.

Lower Tax

With regard to the lower tax promise, the Personal Allowance (the amount people can earn before paying any tax) will increase – as anticipated – from £10,600 in the financial year 2015-16 to £11,000 in 2016-17. A longer term plan is to increase this still further to £12,500 by 2020. The ultimate ambition is pass a law to make sure that those working 30 hours a week and earning the National Minimum Wage will pay no tax whatsoever, although clearly this will need further clarification in due course.

Dividend tax will also be reformed. Here the existing dividend tax credit (this reduces tax paid on dividends from shares) will be replaced by a new £5,000 tax-free allowance on income from shares from April 2016 and this will be available to all taxpayers. To offset the cost of this to the Exchequer, those with more significant dividend income will see an increase in the tax rate they pay.

Inheritance tax will also be subject to changes from 2017-18. The idea is to allow individuals to each have a ‘family home allowance’ which they can pass on to their children or grandchildren, tax-free, when they die. This allowance will be added to the existing Inheritance Tax threshold currently set at £325k and will potentially allow property up to the value of £1m to be passed down from 2020-21 (see table below). For those with estates valued over £2m the allowance will be gradually withdrawn.

This is how the effective Inheritance Tax thresholds will look in 2020-21: Read more

George Osborne

Highlights from the Chancellor’s Budget, 18 March 2015

/in , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , /by

Along with some encouraging news about the UK economy, some interesting new measures were announced in the Chancellor’s Budget yesterday and below we highlight those which we feel will directly impact the majority of UK taxpayers:

  • As widely forecast, the tax-free allowance will increase. The amount people can earn before paying tax will rise to £10,800 from 2016-17 and then to £11,000 from 2017-18. At the same points in time, higher earners will also receive a two stage increase to the threshold at which they start to pay a 40% rate of tax, with the threshold increasing to £43,300 by 2017-18.
  • The Chancellor also announced a brand new Personal Savings Allowance whereby the first £1,000 of interest (£500 for higher rate taxpayers) will be tax tree. This new allowance will kick in from April 2016 and will take 95% of taxpayers out of savings tax completely. (Fact Sheet available here).
  • Another new scheme announced was the introduction of a new ‘Help to Buy ISA’ aimed at prospective first time buyers. This fairly generous scheme means that the Government will chip in up to £50 extra per month (up to a ceiling of £3,000) when an eligible saver saves up to £200 per month towards their first home. (Fact Sheet available here).
  • In another ISA reform, savers will now be able to withdraw money from a new Flexible ISA and deposit it back later in the same financial year without losing any of their usual ISA tax benefits. £15,240 will be able to be put into this re-styled savings vehicle. Read more

The Chancellor’s Budget, March 2014

/in , , , , , , , , , , , , , , , , , , , , , , , , /by

The Chancellor, George Osborne, has now presented his March 2014 Budget to Parliament. There was lots of talk about the economy, growth forecasts, supporting UK businesses and employment – as well as some obvious political spin bearing in mind the European and General Elections are just around the corner – however we thought we’d concentrate on the most important changes, mainly in relation to tax itself as that’s what is going to affect Taxfile customers and readers the most. So here is our snapshot:

For individuals:

  • The threshold before earnings are subject to income tax (the ‘tax-free personal allowance’) is set to rise to £10,500;
  • The higher rate of tax will kick in for earnings above £41,865 from April 2014, rising again to £42,285 in 2015;
  • The first part of the ‘Help to Buy’ equity loan scheme for those aspiring to buy a new home is to be extended until 2020 (previously 2016);
  • The Stamp Duty on homes worth over £500k is to increase to 15% for those which are bought by companies;
  • Inheritance tax will be scrapped for members of the emergency services who “give their lives protecting us”;
  • Cash and Shares ISAs will be merged into a single New ISA (“NISA”). The annual tax-free limit for the NISA will be £15k (£4k for junior equivalent) from 1 July 2014.
  • From April 2015, pensioners will no longer be forced to buy an annuity with their pension fund. They will now be able to cash in as much or as little as they want to from their pension pot.
  • From June 2014, the amount people will be able to invest into Premium Bonds will increase to £40k (from £30k). From 2015 this will rise again to Read more

Annual Investment Allowance

/in , , , , , , /by

Capital allowances are set by the government at fixed rates at which a business can claim the expenditure on fixed assets against the taxable profit.

From April 2008 the 50 per cent and 40 per cent first year allowances was replaced with a 100 per cent Annual Investment Allowance for capital purchases in any one year of up to £50,000.

On 6 April 2008 the annual writing down allowance (WDA) for plant and equipment was reduced from the previous 25 per cent to 20 per cent per annum. This writing down allowance is applied to the written down value of equipment brought forward from earlier tax years.

The annual investment allowance applies to all assets categorised as plant and machinery which includes most fixed assets including plant, equipment, fixtures and fittings, computer equipment and commercial vehicles.

Important to note is that qualifying plant and equipment expenditure does not include Motor Cars.

Motor vehicles are now subject to a reduced writing down allowance in the first year of 20 per cent.

The annual investment allowance does not replace the 100 per cent first year allowance schemes currently applicable to various green and environmental schemes and approved research and development projects ( for example Research & Development Allowances or Business Premises Renovation Allowances). So these schemes will be unaffected by the introduction of the AIA. The annual investment allowance is complimentary to these schemes.

Another important thing worth remembering is that for the financial year starting April 2008 small businesses which have a written down balance for tax purposes of under 1,000 pounds will be entitled to write off the total written down value as a capital allowance.

If by any chance you decide selling the asset after claiming the AIA, the proceeds of the sale would go into your capital allowances calculation and you would have a balancing charge to the value of the sale proceeds which would be treated as a taxable income.

If you have any queries regarding AIA or any tax-related matter, Taxfile’s accountants in South London and tax advisers in Exeter are here to guide you through.

© Copyright - Taxfile 2026. All rights reserved | Site by Starling Design
Call Now Button