As we approach the end of another tax year now is a good time to take stock and remind ourselves of some of the key factors that will affect businesses and individuals in 2014/15.
Income Tax – in 2014/15 the personal tax allowance increases to £10,000, but the higher rate tax threshold falls to £31,865. As a result the point at which 40% tax becomes payable increases slightly, from £41,450 to £41,865.
Corporation Tax – the rate of corporation tax for company profits exceeding £1.5m falls from 23% to 21% from April 2014. From April 2015 the rate for “large” and “small” companies will be aligned at 20%.
Annual Investment Allowance (AIA) – the temporarily increased AIA of £250,000 ceases on 31 December 2014, reverting to £25,000. There will be complicated rules to deal with accounting periods straddling the change, but also tax planning opportunities to purchase equipment before the reduction.
Pension Annual Allowance – the annual tax allowable sum payable into a personal pension scheme falls from £50,000 to £40,000 from 6 April 2014. Unused allowances from earlier years can be used though to bolster the allowance.
National Insurance (NI) Employment Allowance – from 6 April 2014 businesses, charities and community amateur sports clubs will be able to reduce their Employer Class 1 NICs bill by up to £2,000 per year.
Married Couples (and Civil Partners) Allowance – from April 2015 there will be an opportunity for basic rate taxpayers to transfer £1,000 of unused personal allowance between spouses.
Auto Pension Enrolment – Over the next few years there will be requirements for employers to enrol all eligible employees into a qualifying pension scheme and make contributions to their plan. For larger employers this is taking effect already, but for the smaller employer (under 50 employees) staging dates will be imposed which could start anytime after April 2015. It is important that you find out your staging date and plan towards this. A good source of reference is The Pensions Regulator.
Despite all these changes opportunities still remain to carry out tax planning, such as:
Review the structure of your business – if you are a sole trader or in partnership there may be tax savings in transferring to a limited company, particularly where your profits are being taxed at higher rates and you do not draw all the profits from the business.
Pension contributions – generally attract full tax relief, but the rules can be complex. There can be advantages to setting up a company pension scheme and arranging for the employer to make pension contributions, as this can also save National Insurance if structured correctly.