TAX TOPICS for 2014/15

The Hot Topic for 2014 is Pensions.

Mandatory Pension Auto Enrolment continues to be phased in for all employers so all employers need to know when they must establish a Scheme. Detailed consideration needs to be given to which pension fund, the costs and long term financial implications of setting up, operating and contributing to the scheme. This may well have the adverse effect of reducing employment, particularly in smaller businesses. However it is up to the employee whether they contribute to the Scheme.

The flat rate State Pension starts in April 2016. Legislation is also being introduced to give greater flexibility for personal pension schemes on retirement but details are still being finalised.

Personal Allowances and Savings

2015/16 introduces the transferable married allowance and the £5,000 savings band @ 0%.

This will only help those with low earnings or with modest pensions and savings but not dividends.

Personal Allowances have increased but with a smaller Basic Rate band more will pay tax @ 40%.

Principal Private Residence

Principal Private Residence exemption for the final period of ownership is now reduced to 18 months. From April 2015 Non Residents selling UK Residential Property will become liable to UK Capital Gain Tax and they may be affected by planned restrictions to their Personal Allowances.

RTI: Linking of Employment data with Benefits and Claims

We have previously referred to RTI where employers have to provide immediate details to HMRC of an individual’s wages/pension with the hours worked. These are now linked to employee records and Benefit and Tax/Universal credit claims and awards will be revised based on this information. There are plans to collect arrears of NIC & overpaid Benefits/Tax Credits through the PAYE coding system.

Other Employment Issues and NIC

With current reporting of liabilities, interest will now be charged for late payment of PAYE/NIC as it falls due. Penalties are being waived until April 2015 to allow smaller employers time to adjust to this more regulated wages system but non compliance will be very expensive.

From April 2014 there is a £2,000 Employment Allowance which must be claimed through RTI but is only available to those paying Employer’s NIC. There are exclusions for Domestic Employers, Public Authorities and those carrying out work mainly of a public nature. Please check that you qualify.

Increases to Company Directors and Spouses basic salaries may be possible with no NIC charge.

Plant and Machinery

The Annual Investment Allowance @ 100% has been increased to £500,000 until December 2015.