The Chancellor of the Exchequer, George Osborne announced his annual Budget to Parliament on 18th March 2015. The Budget is the Government's annual financial statement and review of levels of taxation. It also includes the Government's future financial strategy and economic forecast.
With a general election due in May, this could have been George Osborne's final Budget announcement. He could have used it as an opportunity to sedduce the electorate, but it was very much business as usual. As a result, there was very little news we hadn't heard already; either in the Autumn Statement or previous Budgets, or through information leaked to the newspapers.
In conclusion, Osborne very much stuck to his long-term plans of conservative spending and no unfunded giveaways. Nonetheless, the Chancellor still managed to make some token gestures for savers and pensioners and he also made further steps to encourage employers and relieve the burden on small businesses.
What does the future hold?
If we do see a change of Government following the election, it is expected that we will have an emergency
Budget shortly afterwards. Any announcements that have not been enacted at that point, may never see the
light of day if they are overridden by an emergency Budget and new measures could also be introduced by
the incoming Chancellor. But unusually, this year’s Finance Bill must receive Royal Assent by 31st March
rather than by July. This won’t leave much time for parliamentary scrutiny.
Budget 2015: The Highlights
The main highlights of the Budget for small businesses and taxpayers were:
Personal allowance and the Basic rate band
Under current plans, the personal allowance and basic rate band will be as follows in future tax years:
|Tax year||Personal Allowance||Basic rate band||Higher rate threshold|
From 2016 to 2017, there will be one Income Tax personal allowance regardless of an individual’s date of birth.
The National Insurance upper earnings and upper profits limits will increase to stay in line with the higher rate threshold.
Transferable tax allowances for married couples and civil partners
From April 2015, a spouse or civil partner who is not liable to income tax above the basic rate may transfer up to £1,060 of their personal allowance to their spouse or civil partner; provided that the recipient of the transfer is not liable to income tax above the basic rate.
This means the recipient spouse or civil partner’s tax bill could reduce by up to £212.
As already announced, from April 2015 there will be a uniform rate of corporation tax of 20% for all companies of any size.
There was hope that small companies would see a fall in their rate, but unfortunately nothing was announced in the Budget.
Annual Investment Allowance (AIA)
The AIA allows businesses to claim full tax relief for purchases of plant and machinery, subject to a number of rules and restrictions.
In Budget 2014 it, was announced that the maximum AIA would be temporarily increased to £500,000 until 31st December 2015, with the amount reverting back to £25,000 after this date. Today the government announced that they will review this allowance and it is hoped that the £500,000 limit will be extended beyond the end of this year. Any changes are likely to be announced in the 2015 Autumn statement.
Research and Development Reliefs
As previously announced the rate of Research and Development relief for Small and Medium Enterprises will increase from 225% to 230% from 1st April 2015. There will also be new restrictions imposed on certain types of expenditure.
Working Tax Credits for the Self employed
From 6th April 2015 there will be a new test to determine eligibility for Working Tax Credits (WTC). Where the claimant is self employed and claiming WTC then the new test will require that the business activity is commercial and profitable, or working towards profitability. For most claimants undertaking a genuine business activity, this shouldn’t be cause for concern.
The government has announced that it will be conducting a broad review of business rates. The current system has been in place for nearly 30 years, however trends in the use of business property and recent reforms to the tax system have led the government to question whether the system is fit for purpose. The findings of the review will be reported by Budget 2016.
The above only applies to England. Business rates have been devolved to Scotland and Northern Ireland and will be fully devolved to Wales from April 2015.
Abolition of Class 2 National Insurance contributions (NICs)
The government announced its intention to abolish Class 2 NICs in the next Parliament and to reform Class 4 NICs to introduce a new benefit test. The government will consult on the detail and timing of these reforms later in 2015.
Class 2 NICs is £2.80 per week for 2015/16, so the self-employed could benefit by a saving of around £150 per year.
Simplification of employee benefits and expenses
As announced at Autumn Statement 2014, the government will simplify the administration of employee benefits and expenses:
- From April 2015 the government will provide a statutory exemption for trivial benefits in kind costing less than £50. This should remove many businesses from needing to report certain benefits and paying Class 1A National insurance on them, and will no longer create a tax charge on the employee.
- From April 2015, following a consultation on the draft legislation, an annual cap of £300 will be introduced for office holders (such as directors) of close companies, and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of trivial benefits in kind each year exempt from tax.
- From April 2016, the government will remove the £8,500 threshold below which employees do not pay Income Tax on certain benefits in kind and replace it with new exemptions for carers and for ministers of religion.
- It will also exempt certain reimbursed expenses and introduce a statutory framework for voluntary payrolling. The new exemption for reimbursed expenses will not be available if used in conjunction with salary sacrifice. But nonetheless, this should mean that applying for dispensations should no longer be necessary.
In summary, these changes should reduce the level of reporting required and consequently, the amount of Class 1A National Insurance payable by the employer and income tax payable by the affected employee.
Through the introduction of an Apprenticeship Voucher, employers will be put in control of the government funding for the training their apprentices need. The new mechanism, which will be developed and tested with employers and providers immediately and fully implemented from 2017, will give employers the purchasing power to have an even greater say in the quality, value for money and relevance of the training that their apprentices receive.
National Minimum Wage
The adult National Minimum Wage (NMW) rate will increase from £6.50, by 3.1% to £6.70 from October 2015. This means that, from 1st October 2015, someone working full time on the adult NMW will see their annual salary rise by over £350.
The apprentice rate will increase by 57p an hour to £3.30. This will result in an annual salary increase of over £1,000 for a full time worker on the current apprentice rate, and ensure those undertaking this important type of training are better rewarded.
Registration and Deregistration Thresholds
|From April 2015||From April 2014|
|VAT registration threshold||£82,000||£81,000|
|VAT deregistration threshold||£80,000||£79,000|
As has happened in previous Budgets the government has scrapped the increase in fuel duty that was planned for September. This will be welcome news for mobile businesses.
Ultra Low Emission Cars
The government plans to review the Benefit in Kind rates for Ultra Low Emission cars in Budget 2016. It is intended that from 2019/20 the rates for these types of cars will increase more slowly than previously announced, with the rates for all other cars to increase by three percentage points in that year.
Zero Emission Vans
As previously announced there will be an increase in the Benefit in Kind charge for zero emission vans. Currently there is no benefit for zero emission vans, but from April 2015 the Benefit in Kind will be 20% of the van benefit charge which for 2015/16 is £3,150.
Fuel Benefit Charge
From April 2015, the fuel benefit charge multiplier for cars will increase from £21,700 to £22,100, and the multiplier for vans will increase from £581 to £594.