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News - 20 March 2014

Budget March 2014: Chancellor offers budget for savers

The Chancellor of the Exchequer, George Osborne, stood up in a packed House of Commons at 12:33 yesterday to deliver a budget speech, he said,
"If you're a maker, a doer or a saver: this Budget is for you. This is a Budget for building a resilient economy"
And a budget, he continued "after the mess we were left, we put Britain right".

Here are the salient points of his fifth budget.

Taxation:

  • Personal tax allowance rises to £10,500 next year, giving average saving of £800.
  • 40p tax rate threshold to rise from £41,450 to £41,865 from next month and then up by further 1% to £42,285 next year.
  • Transferable tax allowance for married couples rising to £1,050.
  • Inheritance tax waived for members of emergency services who give their lives in job
  • From midnight anyone buying home over £500,000 through corporate entity to pay 15% stamp duty to "avoid abuse".
  • Tax on homes owned through a company to be extended from residential properties worth more than £2m to those worth more than £500,000
  • VAT waived on fuel for air ambulances and inshore rescue boats
  • All long-haul flights to carry lower rate of air duty currently charged on flights to US
  • Increased disclosed tax avoidance schemes scrutiny for the wealthy.
  • City fines over Libor rate-rigging to continue going to military charities and emergency service charities.

Fuel, Alcohol and Tobacco:

  • Beer duty cut by 1p a pint
  • Duty on ordinary cider frozen
  • Fuel duty rise planned for September will not happen
  • Tobacco duty to rise by 2% above inflation
  • Alcohol duty escalator scrapped
  • Duty on spirits and ordinary cider frozen.
  • Duty on fixed-odds betting terminals increased to 25%
  • Bingo duty halved to 10%.
  • 20% tax relief for theatre productions

Savings and Pensions:

  • Tax-free ISAs to be boosted to £15,000 per year from July. Junior ISAs up to £4,000 a year.
  • Stocks and shares ISAs can be transferred to new single ISA scheme.
  • Abolition of 10p starting rate of tax on income from savings
  • Zero tax band to cover £5,000 of savings.
  • Premium Bonds cap lifted from £30,000 to £40,000 in June, and to £50,000 next year.
  • All retirees on defined contribution pensions to be offered free, impartial, face-to-face advice.
  • No need for pensioners to buy annuities if they do not wish to.
  • Income requirement for flexible drawdown from £20,000 to £12,000, raised cap drawdown limit from 120% to 150%.
  • Lump sum small pot level lifted five-fold to £10,000.
  • All tax restrictions on pensioners' access to pension pots removed and tax on cash removed on retirement cut from 55% to 20%
  • Increase in total pension savings people can take as a lump sum to £30,000
  • £20m to be spent in next two years working with consumer groups over pension advice.
  • New Pensioner Bond paying market leading rates, issued by National Savings and Investments, open to everyone aged 65 or over. Available from January next year.

The economy:

  • Twelve-sided £1 coin to be introduced in 2017 to thwart forgery and "In honour of our Queen"
  •  Independent OBR growth forecast revised upwards to 2.7%, up from 2.4% in Autumn Statement.
  • Growth next year is also revised up to 2.3%, then 2.6% in 2016 and 2017, with growth expected to return to long-term trend of 2.5% in 2018.
  • 1.5 million new jobs forecast in next five years.
  • Deficit this year of 6.6% reduced to 5.5% next year, then expected to be 4.2%, 2.4% and finally 0.8% in 2017-18. Following year forecast surplus of 0.2%.
  • Expect to borrow £108bn this year, £12bn less than forecast last year. No borrowing from 2018-19.
  • OBR forecasts public debt "to be 74.5% of GDP this year; 77.3% next year; peaking at 78.7% in 2015-16 - lower than the 80% previously forecast - before falling to 78.3% in 2016-17, then falling to 76.5% and then 74.2% in 2018-19".
  • A new charter for budget responsibility to be brought in this autumn
  • Promises to make permanent £1bn reduction in government department overspends

Spending:

  • Foreign aid to be 0.7% of national income.
  • Public sector spending reduction to reach £1bn by 2015-16.
  • A permanent cap on welfare, excluding state pension, set at £119bn in 2015-16, rising in line with forecast inflation to £127bn in 2018-19.


Businesses:


  • Accept recommendation to move collection of Class 2 NICs into self-assessment, abolishing for 5 million people "this wholly unnecessary bureaucracy".
  • Corporation tax - high street stores will get £1,000 off their rates, and businesses the £2,000 Employment Allowance.
  • From next year, corporation tax to drop from 21% to 20% and under-21s taken out of the jobs tax.
  • Business rates discounts and enhanced capital allowances will be extended for another three years
  • Research and development tax credit for loss-making small businesses raised from 11% to 14.5%
  • Annual investment allowance doubled to £500,000 and extended to the end of 2015
  • Lending for exporters doubled to £3bn and interest rates on that lending cut by a third
  • Welfare cap
  • Budget to be capped at £119bn for 2015-16
     

Jobs:

  • Support for more than 100,000 new apprenticeships.
  • New Alan Turing Institute for computing "big data" to boost Britain's IT prowess.
  • OBR forecasts 1.5 million more jobs over the next five years and earnings to grow faster than inflation
     

Housing and infrastructure:

  • Help to Buy equity loan scheme extended to 2020
  • Support for building of more than 200,000 new homes
  • £270m guarantee for Mersey Gateway bridge
  • Legislation to give Welsh government tax and borrowing powers to fund infrastructure needs, including improvements to M4
  • £140m extra for flood defence repairs and maintenance
  • £200m made available to fix potholes


Reliefs:


  • VAT relief on fuel for air ambulances and inshore rescue boat services across Britain, and a new air ambulance for London.
  •  Export finance lending interest rate to be cut by a third and lending doubled to £3bn.
  • From 2015, all long haul air passenger flights carry same, lower, band B tax rate.
  • New allowance for ultra high pressure, high temperature oil field for North Sea oil and gas.
  • Right to Build scheme for builders of their own homes including £150m of finance to support it.
  • New £200m fund for councils "to bid for" to fix potholes across Britain.
  • Additional £140m help for flood damage.
  • Tax relief of up to 25% for touring theatrical productions.


Energy:

  • £7 billion package to cut energy bills includes £18 per ton cap on carbon price support, saving medium-sized manufacturers £50,000 and families £15 a year
  • Compensation scheme for energy intensive industries extended by four years to 2019/20; £1 billion to protect manufacturers from cost of green levies


For reaction to the Budget, see related postings during the week

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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