Budget 2014 - Highlights

Pensions

• From April 2015 all tax restrictions on the amount that pensioners may withdraw from their pension pots will be removed.

• The taxable element of pension pot is to be taxed at the marginal rate of tax (rather than the current 55% tax rate) from April 2015. The amount that may be withdrawn from pension as a trivial commutation lump sum is to be increased to £30,000 from 27 April 2014.

• There is an increase in age that people can access their pension pots from 55 to 57 in 2028.

Personal Tax & IHT

• There is an increase in personal allowance from £10,000 in 2014/2015 to £10,500 in 2015/2016 for those born after 5 April 1948.

• The higher rate threshold is set at £41,865 for 2014/2015 and £42,285 for 2015/2016.

• The capital gains tax annual exemption will increase to £11,000 in April 2014.

• The current system of cash and stocks and shares ISAs is to be reformed from 1 July 2014 with the introduction of New ISAs (NISAs) with a tax free savings limit of £15,000 pa and no restriction on the amount that may be invested in cash.

• The annual limit for children's ISAs will be increased to £4,000.

• A starting rate of tax for savings income is to be reduced from 10% to 0% from 2015/2016. The 0% rate will apply to up to £5,000 of savings income.

• Further detail is released in relation to the transferable nil rate band for married couples.

• An IHT loophole is closed, which allowed a deduction for debts to be claimed where the borrowed funds were deposited in a foreign currency account which was not be subject to IHT through the excluded property rules.

• Capital gains tax relief for up to 50% of capital gains reinvested in Seed Enterprise Investment Scheme (SEIS) shares is to be permanently extended from 2014/2015 onwards (previously the relief applied to 100% of gains reinvested in 2012/2013 and 50% of gains reinvested in 2013/2014).

Business Taxes & Property

• There is a temporary increase in the Annual Investment Allowance (AIA) for capital allowances from to £500,000 until 31 December 2015. The AIA should revert to £25,000 at the end of this period.

• R&D Tax Relief – the rate of the payable tax credit for loss making companies is to increase to 14.5% from 1 April 2014.

• Tax measures (such as the 15% rate of SDLT, ATED and CGT at 28%) currently payable where certain corporate entities (non natural persons) own residential property worth more than £2m, are to be extended to residential properties worth more than £500,000 from midnight on 19 March 2014.

Accelerated payment of tax

Where a particular type of planning has been successfully litigated (by HMRC) with respect to another taxpayer, HMRC will have the ability to issue ‘follower notices' and demand that all taxpayers who have implemented the particular planning will have to pay the tax in dispute, before their cases are determined. This will also apply to a large category of cases including open enquiries where the planning has been disclosed under DOTAS, enquiries where a taxpayer is appealing against a closed enquiry or discovery assessment and arrangements which fall foul of the General Anti Abuse Rule.

There were a number of not so new announcements, many of which had already been made at the Autumn Statement in December 2013:

• Dual contracts - Further details were announced about a previously announced proposal to restrict the advantage of dual contracts where generally the foreign earnings are subject tax at less than 65% of the additional rate.

• Capital gains tax for non-residents owning UK property - There is to be a consultation on extending capital gains tax to non-residents disposing of UK residential property as of April 2015.

• Principal private residence relief - The principal private residence exemption is to be restricted so that the final exemption period will be reduced from 36 months to 18 months as of 6 April 2014.

• Trusts - As previously announced at Autumn Statement 2013, there are various measures to simplify the inheritance tax treatment of relevant property trusts by aligning the filing and payment dates and treating retained income as accumulated after 5 years for the purposes of certain IHT charges. Again as previously announced trusts the capital gains tax uplift on the death of a vulnerable beneficiary will be extended to all qualifying trusts for disabled persons.

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