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The Chancellor’s Budget, March 2014

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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

Autumn Statement by the Chancellor of the Exchequer

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George OsborneOn 5 December 2013 George Osborne, Chancellor of the Exchequer, gave his Autumn Statement in Parliament. Key announcements included:

  • A rise for the Personal Allowance, as was long-anticipated, to £10,000 in 2014/15;
  • the higher 40% tax rate threshold also increasing to £41,865;
  • A new, transferable, tax allowance of £1,000 for married couples and those in civil partnerships from April 2015;
  • For employees aged under 21 employers will not have to pay Class 1 National Insurance (‘NI’) Contributions on earnings up to the Upper Earnings Limit;
  • Capital Gains Tax (‘CGT’) for future gains will now also apply to NON-resident individuals from April 2015 (previously this had been applied only to UK resident landlords);
  • For 2014/15 the annual ISA subscription limit will increase to £11,880 (of which £5,940 can be in cash);
  • There were also announcements relating to the continuing clamp-down on tax avoidance, improvements and plans for UK infrastructure, and the proposed inheritance tax (‘IHT’) simplification for trusts.

The full speech transcript can be read here or alternatively view the following video recording: Read more

Savings Income and Tax

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Savings income is added to your other income and taxed . Banks and building societies are required by law to deduct income tax at 20% from interest before they pay it to you. They pay this to HM Revenue & Customs. This is confirmed by the entry ‘net interest’ on your bank or building society statement.
If you’re a higher rate (40%) taxpayer you owe tax on the difference. If you have a low income you may be able to claim tax back.
If you are a basic rate taxpayer you do not have to take any action as no extra tax is due and 20% tax has already been deducted at source by the bank or building society.
If you are a higher rate taxpayer than you have to let the Tax Office know what interest you have received so they can collect the extra tax either by asking you to fill in a tax return( if you are self-employed and normally have file self assessment) or adjust your tax code if you are employed or you receive pension. Then they will also send you a form called Tax Review P810 in order to check your level of savings income and then a change your code if necessary.
Your interest is taxable in the tax year that it is paid to you, or credited to your account, even if part of it has accrued in the previous tax year. So you do not have to include any interest earned this year when working out your taxable income if it hasn’t been paid yet.Your bank/building society may send you a ‘Certificate of Tax Deducted’ or a statement containing this information after the end of each tax year.
Also, if you have a joint account with a husband, wife or civil partner you should declare half of the income as yours. The second half should count towards their income.
On some types of savings income you do not have to pay any tax. Among them, we can mention the following:
• Cash mini ISA;
• all prizes received from Premium Bonds;
• interest received from Fixed Interest Savings Certificates;
• interest from Index Linked Savings Certificates;
• interest, including bonuses, received from Children’s Bonus Bonds.
Also the interest paid by HMRC on over-payments of tax (so called repayment supplement ) is non-taxable.
If you are not due to pay any tax you can register your bank or building society account to receive your interest without tax taken off. You do this by completing form R85 and giving it to your bank or building society.
If you need to know more about the interest on savings and whether it is taxable or not, Taxfile’s tax accountants are here to help.

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