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UK tax updates 2014/15
07.04.14
The personal allowance for the 2015/2016 tax year will increase to £10,500 (from £10,000 for the 2014/2015 tax year). Individuals can earn up to £10,500 from 6 April 2015, without paying a penny of UK income tax. This will exclude 300,000 workers from paying any tax. The increase in the personal allowance means that UK taxpayers will on average be just over £200 per year better off than they are at present.
The higher rate tax threshold (40%) will rise to £41,865 on 6th April 2014 and then to £42,285 from 6 April 2015. This will save taxpayers with income that exceeds this threshold £83 and a further £92 for the 2014/2015 and 2015/2016 tax years respectively.
The rules on the withdrawal of cash from private pension schemes upon retirement have been significantly relaxed. Previously it was only possible to withdraw 25% of your pension pot tax free. If you wished to withdraw the remainder as cash you would be taxed at a whopping 55%.
The only option to avoid paying this tax was to use the remaining 75% balance to buy annuity from an insurance company which would subsequently pay out an annual income for the rest of your life. Annuities were the only realistic option available. Therefore annuity providers had complete control of the market. The outcome was increasing fees and decreasing amounts of annuities being paid out making the annuity regime increasingly inefficient and unpopular.
It was announced that as from April 2015, the 55% tax charge will be abolished and you will only be taxable at your normal marginal rate of income tax (20%, 40% or 45% on any drawdown that is made). The amounts held in pension pots will be treated as normal investment income.
As a result the individuals are offered greater flexibility and freedom to decide whether or not to buy an annuity from an insurer. This will force annuity providers to make the purchase of annuity more attractive than they currently are.
The annual tax-free savings ISA allowance will be increased to £11,880 on 6 April 2014, and then to £15,000 on 1 July 2014. In addition to the increase in the ISA threshold, from 1 July 2014 an ISA can consist entirely of cash or shares or a combination of the two
This is an important change as under current rules, the amount of cash that can be paid into an ISA prior to 1 July is £5,940, with the remainder of your annual allowance being used up by shares.
The 10p starting rate for income from saving has been removed and the band extended for tax-free income from £2,800 to £5,000. As a result low-income households will pay less tax on their income from savings.
The rise in UK fuel duty which was planned for September 2014 has now been cancelled. This should help ease the seemingly ever-increasing UK fuel prices.
The level of air passenger duty on all long haul flights has been reduced.
Duty on spirits and ordinary cider was frozen and beer duty has been cut by 1p a pint.
Tobacco duty will increase by 2 per cent above inflation.
Duty on fixed-odds betting terminals (casino-style gaming machines in Bookmakers) will be increased to 25 percent.
Bingo duty was halved to 10 per cent.
The Government will be funding the construction of 200,000 homes.
An additional £140 million has been made available for repairs and maintenance to flood defenses, following the damage caused by the recent storms in the UK.
£200 million will be made available for maintenance and pothole fixing on UK roads.
The Research and Development tax credit for loss-making small businesses was raised from 11 per cent to 14.5 per cent
Annual investment allowance was doubled to £500,000 and extended to the end of 2015, which will be an incentive for UK businesses to invest in capital expenditure, such as plants and machinery.
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