Expected tax changes in the Budget 2014

The government has already published certain draft clauses for the Finance Bill 2014. We have listed below some of the more topical changes disclosed.

Changes for the tax year 2014-15:

Personal Tax:

  • Individuals born after 5 April 1948 will be entitled to a personal tax allowance of £10,000.
  • Employees will be able to increase the maximum value of shares acquired under Share Incentive Plans (SIP) and Save As You Earn (SAYE) schemes. The increased limits will be: SIPs – £3,600 on the free shares that can be awarded to employees and £1,800 on the partnership shares employees can purchase; SAYE – the monthly amount that employees can save will be increased to £500.
  • It is proposed that the annual exemption limit for employer-related loans, to be treated as earnings, will be increased from £5,000 to £10,000.

Capital Gains Tax:

  • The annual exempt amount is to be increased to £11,000.
  • The rule that exempts the final 36 months of ownership of a private residence from CGT is to be reduced to 18 months. The 36 months will still apply if the owner is disabled or moved into a care home.

Business Tax:

  • HMRC is introducing new legislation affecting Limited Liability Partnerships. Members of LLPs who satisfy the new criteria as “salaried members” will effectively lose their self employed status and be taxed under the PAYE legislation. There will also be restrictions on the way in which mixed partnerships, those with individual and typically corporate members, allocate profits and losses.

Changes for the tax year 2015-16:

It is proposed that spouses (including civil partners) will be able to transfer up to £1,000 of their personal allowance to their spouse (or civil partner). This will be of limited use as a tax planning device. It will only apply where neither party is a higher rate tax payer.  The maximum benefit will be £200.  It is nonetheless better than many political tax saving benefits.