What the Budget means for local businesses

Following the 2014 Budget Ian Wilson from Hilton Sharp and Clarke has put together a small summary of the key points relevant to local businesses:

Key points:
•    £2,000 Employment allowance
•    Seed Enterprise Investment schemes made permanent
•    Increase in Annual Investment Allowance to £500k
•    Increased pension drawdown flexibility

Employment allowance
From April 2014 employers will be able to claim up to £2,000 employment allowance against employer’s Class 1 National Insurance Contributions.  The majority of employers will be able to benefit from this reduction to their National Insurance bill which will be especially useful to smaller firms. Small companies with just the directors on a minimum salary may also benefit from increasing their salaries to take advantage of this allowance.

Seed EIS
For new companies looking to expand in the coming years but who are finding financing the growth difficult, Seed EIS (SEIS) has now been made permanent. This means that potential investors may be able to receive 50 per cent income tax relief on investments in small start up companies. It is also good news if you are looking to invest.

Annual Investment Allowance (AIA)
The AIA threshold has been doubled to £500k for qualifying investment in plant and machinery purchased from April 2014. Companies will receive a 100% deduction against profits for qualifying costs in the year of purchase, meaning it is a great time to invest in new capital. This threshold is in place until the end of 2015.

Pension
From April 2015, individuals will be able to draw down from a defined contribution (DC) pension after age 55, subject to their marginal rate of income tax. There will be no minimum income requirement as currently applies under flexible drawdown. From the same date, all individuals with DC pension pots will be offered free and impartial face-to-face guidance at the point of retirement. These proposals are subject to consultation but this is good news with the upcoming auto-enrolment pensions meaning an increased number of people will have personal pension plans.

Other points to note include:

Corporation tax (CT)
As announced previously, the main rate of CT will be reduced to 21% from April 2014 and 20% from April 2015. The small company profits rate will remain at 20%.

VAT registration thresholds
There have been small changes to the VAT thresholds, with effect from 1 April 2014; the registration threshold will rise from £79,000 to £81,000 and the deregistration threshold will rise from £77,000 to £79,000.

Class 2 NICs
From April 2016, Class 2 NICs for the self-employed will be collected through self-assessment which will see an end to the current direct debit system.

Individual taxation
For 2014/15, the personal allowance will rise from £9,440 to £10,000 and there will be a £145 reduction in the basic rate band from £32,010 to £31,865, meaning everyone should see at least a small gain in their take home pay.

From 1 July 2014, ISAs will be simplified with the creation of the ‘New ISA’ (NISA), with all existing ISAs will becoming NISAs. From 1 July 2014, the 2014/15 overall annual subscription limit will be increased from £11,880 to £15,000. All of the new limit may be invested in cash deposits or investments, rather than the current 50% cap.

For any additional advice or assistance please contact one of our team at our New Road office on 01273 324163. We also have a monthly newsletter with the latest accountancy updates and information, subscribe here.

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