As expected at this stage of the Parliament, while there was not a lot of room for manoeuvre, there were some sweeteners across the board.  There was little for small businesses as alot of the headline issues were aimed at individuals.  More will be released in the Finance Bill in due course.

 For Business

  • The large company corporation tax rate reduces to be in line with the small company tax rate of 20% from April as previously announced, this potentially saves small companies associated with larger ones paying a higher tax under the marginal rate system.
  • The annual investment allowance currently stands at £500k pa until 31 December 2015 when it will revert to £25k, the Chancellor implied that this would be a step to far and it would be maintained at a higher rate if they were re-elected
  • VAT threshold increases from £81k to £82k
  • Contractors will no longer need to file returns under the Construction Industry Scheme where no subcontractors were paid in the month
  • Class 2 NI will be collected as part of the self assessment process from 2015-16 replacing the somewhat dated system of a monthly DD of ~£10-£15pm
  • Loopholes in entrepreneurs relief are being closed and umbrella companies will continue to be targeted, while allowing those who are truly self employed to continue to trade
  • Following pressure from farmers the averaging period for farm profits increases from 2 to 5 years which should ease cashflow in the poor years, remembering the flooding issues a couple of years ago

 Annual tax return to be abolished

Initially this seems like great news but in reality only affects those with very simple tax affairs and no other income.  Some of the date will be automatically downloaded from other bodies, so P60 and P11D information, and presumably child benefit.  This will not take account of dividends, pension contributions and gift aid all of which can have a major effect on the tax bill, so there will have to be active steps to update the tax record online.  I do not think this will be a major change for small business owners

 Individuals

  • The personal tax allowance is increasing to £10,600 from April 2015, then to £10,800 and £11,000 in 2016/17 and 2017/18 respectively
  • The 40% tax band will be increasing by more than inflation reaching £43,300 by 2017/18 (2015/16: £42,385)
  • The first £1,000 of savings interest will now be tax free
  • A new fully flexible ISA is being introduced allowing withdrawal and reinvestment without losing the tax exemption
  • Pension lifetime allowances are to be reduced from £1.25m to £1m but there will be no reduction in the annual pension allowance

 Other news and measures

  • After the assistance to buy a new air ambulance for Kent announced in the Autumn statement, further areas will now receive assistance.  Blood bike services will now benefit from the same VAT exemptions as other similar charities which has been welcomed by Kent based Service by Emergency Response Volunteers (SERV)
  • Due to the fall in global oil prices a number of measures are being introduced to encourage continued activity in North Sea oil extraction, saving jobs mainly in Scotland
  • Various measures including an increase in the bank levy, the google “diverted profits” tax, removal of tax relief on PPI claims and targeting aggressive tax avoidance schemes will all contribute to reductions in the deficit
  • No increases in tobacco, wine or gaming duty, beer duty to be cut by a further 1p, cider and scotch whisky by 2%.  The proposed fuel duty increase for September 2015 has been abolished
  • To encourage more fuel efficient cars the benefits in kind increases have been scaled back, but there will be larger increases for conventional fuel cars.  Also £100m investment being made in driverless car technology

This is a summary of the proposals as they currently stands but may may change once the Finance Bill is introduced so you should seek professional advice before taking any steps based on the contents.  If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”