On Thursday 5 December, Chancellor George Osborne gave his 2013 Autumn Statement outlining a number of developments in key areas of tax.
Personal Allowance for 2014/15
For those born after 5 April 1948 the personal allowance will be increased from £9,440 to £10,000. When the current Government came into power in 2010 the personal allowance was £6,475 so there has been a significant increase. This means that for most individuals, their first £10,000 of income will be free of tax. The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction is £1 for every £2 of income above £100,000. So for this year there is no allowance when adjusted net income exceeds £118,880. Next year the allowance ceases when adjusted net income exceeds £120,000.
Transferrable Personal Allowance
The Transferable Tax Allowance will enable spouses and civil partners to transfer a fixed amount of their personal allowance to their spouse. The option to transfer will be available to couples where neither pays tax at the higher or additional rate. If eligible, one partner will be able to transfer £1,000 of their personal allowance to the other partner. The transferor’s personal allowance will be reduced by £1,000. It will mean that the transferee will be able to earn £1,000 more before they start paying income tax. For those couples where one person does not use all of their personal allowance the benefit will be up to £200.
Corporation Tax Rates
The main rate of corporation tax will be 21% from 1 April 2014. The current rate is 23%. From 1 April 2015 the main rate of corporation tax will be reduced to 20% and unified with the small profits rate. The small profits rate will therefore remain at 20% until then. This means that from 1 April 2015 all companies will pay the same rate of corporation tax.
National Insurance – £2,000 Employment Allowance
The Government will introduce an allowance of up to £2,000 per year for many employers to be offset against their employer Class 1 National Insurance Contributions (NIC) liability from April 2014. The allowance is limited to the employer Class 1 NIC liability if that is less than £2,000. It is expected that the allowance will be claimed as part of the normal payroll process. Employer’s payment of PAYE and NIC will be reduced each month to the extent it includes an employer Class 1 NIC liability until the £2,000 limit has been reached.
Employer NIC Exemption for Under 21s
From April 2015 the Government will abolish employer NIC for those under the age of 21. This exemption will not apply to those earning more than the Upper Earnings Limit, which is £42,285 per annum for 2015/16. Employer NIC will be liable as normal beyond this limit.
Capital Gains Tax – Private Residence Relief
A gain arising on a property which has been an individual’s private residence throughout their period of ownership is exempt from CGT. There are deemed period of occupation rules which may help to provide an exemption from CGT even if the individual was not living in the property at the time. The final period exemption applies to a property that has been an individual’s private residence at some time even though they may not be living in the property at the time of disposal. From 6 April 2014 the final period exemption will be reduced from 36 months to 18 months.
For more detail on the measures outlined above and additional announcements made by the Chancellor, please click here for our full report on the 2013 Autumn Statement.