Please access our full Budget report Here
We set out below some highlights. Please read the detail of these and other subjects in the full budget report.
No tax returns, digital tax accounts instead?
The chancellor announced a significant change whereby tax returns as such will not be required in the future from small businesses and individuals.
This measure will depend on whether the government gets re-elected.
They will release a road map of the intended changes towards the end of the year. So we all await the detail of exactly what the new system will be.
What do we know so far?
Small businesses and individuals will have a digital tax account which will be set up in early 2016. Those businesses and individuals will be able to access and manage their tax affairs via those accounts.
Presumably similar to now, there will be a process of downloading self employed and property income accounts to the digital tax account. Items known to HMRC like employment income and savings interest will be automatically downloaded by HMRC to the digital tax account, without the need for the individual or accountant to do it.
This will not apply to complex cases, although the definition of what will be considered complex is not yet known. As we have said this has been reported to refer to small businesses and individuals.
This will not apply to companies.
For those who operate their own limited company, how dividends will be reported or downloaded to the digital tax account is not yet known.
This may take some time for the new system to be operational and take place over the life of the new parliament. Certainly this will not apply to the next required tax returns for the year ending 5 April 2015.
New help to buy ISA
Good news for those saving to buy their first home.
They will be able to open an ISA account (one per person not one per couple) with an initial deposit of up to £1000 and enjoy tax free savings up to £200 pm each on which the government will add £50 for each £200 saved payable when the money is used to buy their first home. Maximum contribution from the government £3000 each on £12000 of savings including interest.
Help for savers
From 6 April 2015, after the granting of the personal tax-free allowance, the starting rate band for the taxation of savings income, usually bank and building society interest, will be increased from £2880 to £5000 and that amount will be taxed at 0% instead of the current 10%.
Don’t get too excited. If your other taxable income exceeds the £5000 limit regardless of savings, you will not receive the 0% tax break on your interest income.
This may though be useful for company owners paid via low salary and high dividends, as the dividend element is not part of the other taxable income taken into account to take you over the £5000 limit.
From 6 April 2016 it gets better. There will be a new personal savings allowance exempting tax on interest of £1000 for basic rate taxpayers and £500 for higher rate taxpayers regardless of other income. There will also no longer be the deduction of 20% tax at source from interest from that date.
Basic tax allowance and rates from 6 April 2015
The personal tax allowance will increase from £10000 to £10600. The higher rate band for 40% tax will rise from £41865 to £42385.
No NIC if you employ under 21’s
From 6 April 2015 employers will not pay employers NIC on employees under 21, as long as they pay them less than £815 per week!
