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Saved by the Budget

Gideon’s rabbit out the hat receives the applause from savers

Whilst last week’s Budget was somewhat unremarkable for SME’s, it was nevertheless surprising in as much that long suffering savers were rewarded for their endurance.

The majority of issues affecting contractors were already known before last Wednesday and what remained to be announced was not earth shattering as far as contractors were concerned.  So here is the best of the rest.


From 1st July 2014. Individual Savings Accounts (ISA’s) will become ‘New ISA’s’ (NISA’s). The annual subscription limit will be increased to £15,000 and the rule whereby only half the overall limit can be invested in a cash ISA will be abolished. Investors will be able to transfer their funds from a stocks and shares account to a cash account.

It will also be possible to invest in a wider range of securities and will include certain retail bonds with less than 5 years before maturity and Building Society Core Capital Deferred Shares.

The flat rate charge of 20% on any interest arising on temporary uninvested cash in a stocks and shares account will be removed.

Starting rate for savings

From 6th April 2015 the maximum amount of a qualifying individual’s savings income that maybe taxed at the starting rate is increased to £5,000 and the starting rate will become nil rather than 10% as it is currently.


The Chancellor is giving people greater flexibility to access their pensions by removing the effective requirement to buy an annuity.

Individuals will be able to choose how they access their defined contribution pensions savings, e.g. they could take all their pension savings as a lump sum, draw them down over time or buy an annuity.

Alongside this, there will be a new requirement for pension providers to ensure that everyone retiring with a defined contribution pension pot receives free and impartial face-to-face guidance on the choices they are confronted with when deciding how to use their retirement savings.

The government will consult on how best to implement these changes, which will be introduced from April 2015. In the meantime, as a first step towards reform, a number of changes to the current rules will come into effect from 27th March 2014 which will allow people to have greater freedom and choice now over accessing their defined contribution pension savings at retirement. These are:

  • reducing the amount of guaranteed income people need in retirement to access their savings flexibly, from £20,000 to £12,000.
  • increasing the amount of total pension savings that can be taken as a lump sum from £18,000 to £30,000.
  • increasing the capped drawdown withdrawal limit from 120% to 150% of an equivalent annuity.
  • Increasing the maximum size of a small pension pot which can be taken as a lump sum (regardless of total pension wealth) from £2,000 to £10,000 and increasing the number of personal pots that can be taken under these rules from 2 to 3.

Tax Administration

Direct recovery of tax debts

Finance Act 2015 will include measures that will allow HMRC to recover tax debts of £1,000 or more directly from the bank accounts of taxpayers who are financially able to pay and who have been contacted numerous times by HMRC in respect of the outstanding taxes. This power will be subject to thorough and careful safeguards.

Personal Taxation

Personal allowance and basic rate 2015/16

For the year ended 5th April 2016, the personal allowance, for those born after 5th April 1948, will be increased to £10,500 and the basic rate tax threshold will be reduced to £31,785.

Transfer of tax allowances

As from 6th April 2015, a spouse or civil partner who is not liable to higher rate taxes will be able to transfer up to £1,050 of their personal allowance to their spouse or civil partner provided they too are not higher rate payers.

Employment Taxation

Recommended medical treatment

From a date to be appointed, when an employer pays for ‘recommended medical treatment’, this will be exempt from tax and NIC up to an annual cap of £500 per employee.

Treatment is recommended where it arises out of a recommendation from an occupational health service to facilitate the return to work of an employee following a short period of absence due to ill health or injury. It will apply where the employee has been unfit for duty for a minimum number of days.

Corporation Tax

Unification of rates

Last year, it was announced that there would be a single rate of corporation tax of 20% effective from 1st April 2015. As a result of this, the associated company rules effectively become redundant in all but certain limited circumstances.

Capital Gains Tax

Principal private residence

Where an individual disposes of a property that they are not currently residing in but which has been their main residence at any time, they are entitled to relief for the final period of ownership. For sales of such property on or after 6th April 2014, the final period of ownership relief is reduced from 36 months to 18 months.

By Andy Vessey


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