George Osborne presented his Autumn Statement to Parliament amid mixed messages spilling from the Treasury, and promoted in the national press, about what he would, and would not give away.
The reported economic indicators were encouraging:
- 1.4% growth in the UK expected for 2013, 2.2% for 2014.
- Increase in jobs this year of 400,000.
- National debt: gradual decreases expected with a Budget surplus forecasted for 2018-19.
A number of incentives for small businesses and changes to personal and business taxation were also confirmed. In more detail they are:
Personal taxes and related matters
Personal Tax and National Insurance 2014-15
- The personal allowance for persons born after 5 April 1948 is confirmed as £10,000 from 6 April 2014. From 2015-16 the personal allowance will increase in line with the Consumer Price Index (CPI).
- The higher rate threshold (the basic personal allowance plus the basic rate limit) will be £41,865. With the basic personal allowance at £10,000 this means that the basic rate limit will be £31,865 from 6 April 2014.
- There will be no percentage increases in the rates of NIC (Class 1, Class 1A, Class 1B and Class 4) for 2014-15, but there will be changes to the various thresholds. The weekly rates for Class 2 and Class 3 NICs will be increased.
Tax Credit, Child Benefit and Guardian’s Allowance 2014-15
- The disability elements of Tax Credits will be increased in line with CPI at 2.7%. Other rates are increased by 1%. The family element of child tax credit remains at £545.
- Child Benefit will be increased by 1%.
- Guardian’s Allowance will be increased in line with CPI of 2.7%.
NEW – Married Person’s Allowance
From April 2015 a spouse or civil partner, who is not a tax payer, or who does not pay tax above the basic rate, will be entitled to transfer up to £1,000 of their personal allowance to their spouse or civil partner. This will not advantage higher rate tax payers as the recipient of the transfer cannot be subject to tax at higher than the basic rate.
In effect, the transferor’s personal allowance will be reduced by £1,000, and the recipient’s tax will be reduced by up to £200 (if the basic rate of tax stays at 20%).
In his speech George Osborne indicated that this was “a beginning”. Perhaps the amount of the transfer will be increased in future years?
NEW – National Insurance Contributions (NIC) opportunity
From October 2015 a Class 3A NIC will be introduced to give those who reach state pension age, before 6 April 2016, an opportunity to boost their Additional State Pension.
Capital Gains Tax (CGT) – Private Residence Relief change
At present, if a property has been occupied at any time as an individual’s private residence, the last three years of ownership are disregarded for CGT purposes – even if the individual is not living in the property when it is sold, and may possibly be claiming private residence relief on a different property at the same time.
From 6 April 2014 this final period exemption will be reduced to 18 months.
TIP: Those property owners considering the sale of a property that has been a private residence at some time should take this change into account – if they can sell before 6 April 2014 they will still exempt the last three years of ownership from CGT.
The Government have also announced plans to introduce CGT on future gains by non-residents who sell UK residential property from April 2015.
CGT Annual exemption
- For 2014-15 this will be £11,000 (for most trustees £5,000)
- For 2015-16 and subsequent years £11,100 (for most trustees £5,500)
NEW – Social Investment tax relief
This is a new relief for investment in social enterprise and will commence April 2014.
Investment in Social Impact Bonds will also be eligible for this new relief.
Other investment incentives 2014-15
- ISAs: Subscription limits £11,880, of which £5,940 can be invested in cash.
- Junior ISAs and Child Trust Funds: investment limits increased from £3,720 to £3,840.
- SAYE schemes set up to help employees save for and apply for shares to be increased from £250 to £500 per month.
- Share Incentive Plans (SIPs): individual limits on the free shares that companies can award will be increased from £3,000 to £3,600 per year. Individual limits on the partnership shares employees can purchase will be increased from £1,500 to £1,800 per year (or 10% of an employee’s annual salary).
Fuel Duty and tax discs
The planned September 2014 increase in fuel duty has been cancelled. No further increases will be made during the current Parliament.
A further administrative inconvenience for motorists is to be abolished: the paper tax disc. It will be replaced by an electronic system.
State Pension changes
The State Pension Age (SPa) will increase to 66 years in 2020. The Government has already indicated the SPa will rise to 67 years by 2028.
It is further proposed that the SPa will rise again: to 68 years in the mid 2030s, and to 69 years by the late 2040s.
The Government estimates that it could save around £500bn from pension expenditure over the next 50 years due to these changes in SPa.
The basic State Pension will rise by £2.95 a week from April 2014.
The Government has committed to delivering an average saving of £50 in household expenditure by reducing the impact of government policy on energy bills. It will do this whilst maintaining support for poorest families and providing new home owners with an incentive worth up to £1,000 to undertake energy efficiency measures.
Average increases in fares will be capped in 2014 in line with RPI, not at 1% above RPI as previously announced.
Film Tax Relief
- From April 2014 the rate of film tax credit for surrenderable losses will be:
25% on the first £20m of qualifying core expenditure (QCE) (subject to maximum of 80% of QCE)
- and 20% thereafter (to a maximum of 80% QCE)
- the minimum UK expenditure qualification will change from 25% to 10%
These measures are subject to State Aid approval.
NEW – Theatre Relief
A consultation will be launched in spring 2014:
- to introduce a limited Corporation Tax relief for commercial theatre productions, and
- a targeted relief for theatres investing in new writings or touring productions to regional theatres.
These measures are expected to come into force from April 2015.
Tax avoidance and evasion – effective as from 5 December 2013
The following five measures have been introduced:
- Two changes to improve the effectiveness of the World Wide Debt Cap.
- Controlled Foreign Companies (CFC) profit shifting – the measure switches off the partial exemption rules for loan relationship credits of a CFC in certain circumstances.
- Partnership taxation – measures to restrict allocation of profits and losses between individual, and non-individual partners, where the motivation is minimising tax.
- Avoidance schemes using total return swaps.
- Double taxation relief revenue protection.
Charities established for tax avoidance purposes
The Finance Bill 2014 will contain provisions to prevent charitable tax reliefs to charities where one of the main purposes of establishing the charity was tax avoidance.
Accelerated tax payment in avoidance cases
There is evidence that tax-payers are entering into avoidance schemes in order to defer tax liabilities. To counter this activity provisions will be included in the Finance Bill 2014 to require payment of disputed tax when a formal avoidance follower penalty notice is issued at the beginning of an enquiry.
- A cap is to be introduced from April 2014 that will limit business rate increases in England to 2%.
- The introduction of up to a £1,000 rates discount to help high street businesses. This includes pubs, cafes, restaurants, charity shops as well as other retailers who occupy retail premises with a rateable value of up to £50,000 in 2014-15 and 2015-16.
- The introduction of a temporary reoccupation relief, granting a 50% discount from business rates for new occupants of previously empty retail premises for 18 months. The relief will be granted to businesses moving into long-term empty retail properties on or after 1 April 2014 and on or before 31 March 2016.
- Extending the Small Business Rates Relief for a further 12 months from 1 April 2014.
NEW – Abolition of employers’ NICs for under 21s
From 6 April 2015 employers will not have to pay Class 1 secondary NICs on earnings paid to the under 21s up to the Upper Earnings Limit (UEL) – below £813 per week.
Investment in young people
- The cap on student numbers at publicly funded higher education institutions in England is to be removed by 2015-16. This should increase capacity to allow 60,000 more young people go to university every year. For 2014-15, the Government will increase the cap for HEFCE-funded institutions by 30,000.
- The Government will provide extra funding for science, technology and engineering students of £50m per academic year from 2015-16.
- The provision of £40m in additional support for people starting higher apprenticeships. This is expected to create 20,000 additional apprenticeships over the next two academic years.
Free school meals
Pupils attending state schools in England, in Reception, Year 1 and Year 2 are to get free school lunches from September 2014 at an estimated cost of £600m per year.
Capital funding will be made available to improve capacity in school kitchens. Additional funding will also be made available to enable Further Education and Sixth Form Colleges to offer free meals to disadvantaged students.