Budget - March 2014. Read a summary here

Posted by Brian on March 20, 2014

The 2014 Budget announced by the Chancellor has grabbed the headlines

Commentators agree that this was a Budget for bingo-playing baby-boomers who have not started to draw their private pensions....

The traditional sin taxes on booze and fuel have largely been frozen or even reduced, although tobacco suffers a 2% above inflation tax rise. Most people aged under 67 will feel the benefit of an increase in personal allowance from £10,000 to £10,500 in 2015, and a transferable married couples' allowance of £1,050 will also help basic rate taxpayers from April 2015. Savers will enjoy higher tax-free limits for ISAs and premium bonds later this year, plus a cut in tax on savings income from 2015.  Here are the main changes as they affect small businesses.  If you need help with your tax return, corporation tax or VAT please get in touch.

Capital Allowances

The rates and thresholds of the main capital allowances will apply as follows:


From:
1 January 2013 to April 2014 1 or 6 April 2014 to 31 December 2015 From 1 January 2016
Main pool: writing down allowance 18% 18% 18%
Special rate pool: writing down allowance 8% 8% 8%
Annual Investment Allowance (AIA) cap: £250,000 £500,000 £25,000

Expenditure within the AIA qualifies for 100% allowance in the year of purchase. The AIA cap was increased to £250,000 on 1 January 2013, and is doubled to £500,000 on 1 April 2014 for companies (6 April 2014 for unincorporated businesses).

This increase in the AIA cap will help businesses invest in equipment and fixtures (cars and buildings don't qualify), with 100% tax relief in the year of purchase. However, great care is needed to calculate the available AIA for accounting periods which straddle the various changes. The AIA cap is due to revert to £25,000 on 1 January 2016.

Corporation Tax

The corporation tax rates for small and large companies will be aligned at 20% from April 2015. This will remove the need for the associated companies rule and the marginal rate of corporation tax will disappear. The rates for the three financial years to 31 March 2016 have been announced as:


Year beginning 1 April:
2013 2014 2015
Small profits rate
(profits up to £300,000)
20% 20% 20%
Marginal rate
(profits in band £300,000 to £1.5 million)
23.75% 21.25% N/A
Main rate for companies
(profits above £1.5 million)
23% 21% 20%

Different rates apply to profits from North Sea oil and gas. Banks pay a special bank levy in addition to these rates of corporation tax.

National Insurance

Employees

The rates and thresholds for National Insurance Contributions for 2014/15 are:

Class: Weekly earnings Rate
Employer's class 1 above primary threshold Above £153 13.8%
Employee's class 1 not contracted out From £153 to £805 12%
Employee's additional class 1 Above £805 2%
Married woman's rate* From £153 to £805 5.85%
Self-employed class 2(per week) - £2.75
Class 3 ( per week) - £13.90
  Annual profit thresholds  
Small earnings exemption class 2 £5,885 -
Self-employed class 4 From £7,956 to £41,865 9%
Self-employed class 4 additional rate Above £41,865 2%

*only available for women who made a valid married woman's election before 11 May 1977.

Self-employed

From April 2016 class 2 NICs will be collected through self-assessment, rather than being paid as a separate direct debit on a monthly or six-monthly basis.