Budget 2014 – Tax proposals for individuals

The Budget delivered on 19 March 2014 updated some previous announcements but also provided a few surprises. Below are some of the issues that are likely to impact you, or your family:

Personal Allowance
For the tax year 2014-15 the personal allowance for those born after 5 April 1948 will be £10,000 (tax year 2015-16 – £10,500).
For those that earn more than £100,000 the personal allowance will be reduced £1 for every £2 earned therefore ceases when adjusted net income exceeds £120,000 (tax year 2015-16 – £121,000).

Tax Bands and Rates
For the tax year 2014-15 the band of income taxable at 20% will be £31,865 (tax year 2015-16 – £31,785) so, for those entitled to the full basic personal allowance, income will be taxable at 40% once total income reaches £41,865 (tax year 2015-16 – £42,285).
The additional rate of tax of 45% is payable on taxable income above £150,000.

For the tax year 2014-15 dividend income will be taxed at 10% where it falls in the basic rate band, 32.5% in the higher rate band and at 37.5% where income exceeds £150,000.

Savings Income
For the tax year 2014-15 the maximum amount of an individual’s savings income qualifying for the starting rate of tax for savings is £2,880 at 10% (tax year 2015-16 – £5,000 at 0%).
The starting rate is not available if taxable non-savings income exceeds the starting rate limit.

Transferable tax allowance
From April 2015 the transferable tax allowance will enable spouse and civil partners to transfer a fixed amount (£1,050) of their personal allowance to their spouse / partner where neither individual is a higher or additional rate tax payer.

New tax-free Childcare Scheme
The new tax-free Childcare scheme will be launched in Autumn 2015 and provide relief at 20% of childcare costs (limited to a maximum cost of £10,000) giving tax relief of up to £2,000 per child.
All children under 12 within the first year of the scheme will be eligible although all parents in the household must meet certain criteria.

From 1 July 2014 the total annual subscription limit for ISAs will be £15,000 for the tax year 2014-15. The total amount can be saved in a cash account (previously only 50% of the overall ISA limit could be saved in cash).

From April 2015 (subject to consultation) individual will be able to choose what they want to do with their defined contribution pension fund:
– If they draw out all the fund on retirement 25% will be tax free, the remainder will be taxed as income in the year
– They can buy an annuity
– They can opt for a drawdown arrangement without a cap or minimum income limit.

If you have any questions please do not hesitate to contact us by phone on 0333 577 0135 or at Info@tracynewman.co.uk

The information published in this blog provides an overview of the regulations currently in force and is for client information only. No action should be taken without first seeking professional advice.
No responsibility for loss incurred by anyone acting or refraining from acting as a result of the information in this blog can be accepted by its author or the firm.

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