The government has published Finance Bill 2014, legislation implementing tax changes announced during the last year.
The bill contains measures which demonstrate government’s commitment to a tax system that delivers its long-term economic plan by helping hardworking households, supporting growth and clamping down on tax avoidance and evasion, including:
- increasing the tax-free Personal Allowance to £10,000 in 2014-15 and legislating for a further increase to £10,500 from 2015-16
- introducing a new transferable tax allowance for married couples and civil partners, allowing spouses in households where neither partner is a higher or additional rate taxpayer, and where one partner has not used up their full allowance, to pay tax on up to £1,050 less of their income from 2015-16
reducing the starting rate of income tax on savings from 10% to 0%, and extending the band to which it applies from £2,880 to £5,000. This will benefit around 1.5 million people, over a million of who, those with total incomes below £15,500, will pay no tax at all on their savings income
- taking the first steps towards bringing in the Budget’s major reforms to give individuals much greater choice about how they access their defined contribution pensions savings from April 2015. This means introducing measures that mean that over 400,000 people will be able to access their pension more flexibly: reducing the amount of secure income that individuals have to demonstrate before they can access their pension savings flexibly (the Minimum Income Requirement) from £20,000 to £12,000; increasing the annual limit for individuals in a capped drawdown arrangement from 120% of an equivalent annuity to 150%; and increasing the total pension wealth that can be taken as a lump sum from £18,000 to £30,000, and increasing the size and number of small pension pots that can be taken as a lump sum
- reducing business and household energy costs by freezing the Carbon Price Support rate at £18 in 2016-17. The government has also committed to maintain this freeze to the end of the decade. This will save businesses £4 billion by 2018-19, and will help British firms to compete in the global race
- increasing the Annual Investment Allowance to £500,000 until 31 December 2015, giving 99.8% of all businesses (4.9 million firms) 100% upfront relief on their qualifying investments in plant and machinery
- supporting research-intensive start-ups and early-stage companies through an increase to 14.5% in the payable R&D tax credit for loss-making SMEs, supporting over £1 billion of investment over the next five years
- introducing a new requirement that users of tax avoidance schemes which have been defeated in another party’s litigation, or which fall within the scope of the Disclosure of Tax Avoidance Scheme (DOTAS) rules or the new General Anti-Abuse Rule (GAAR), should pay the disputed tax upfront
- extending the Annual Tax on Enveloped Dwellings (ATED) and associated measures to reduce incentives for residential properties to be held as investments in corporate “envelopes” and left unoccupied
- tackling the avoidance of employment taxes, by taking action to prevent employment intermediaries (both onshore and offshore) from avoiding their obligations, including through disguising employment as false self-employment
Exchequer Secretary to the Treasury, David Gauke said:
The government’s long-term economic plan is to build a stronger, more competitive economy and a fairer society.
The tax changes implemented in this bill will help support the next stage of the plan to create a more resilient economy by supporting businesses, working households and savers, and taking action against those who try to dodge their tax obligations.
The measures contained in the bill were announced by the Chancellor at Budget 2013, Autumn Statement 2013 or Budget 2014.
Finance Bill 14 reflects the government’s continued commitment to developing tax legislation in a transparent way, and to consult wherever possible. Many of the policies legislated in the bill have benefited from extensive consultation as they have been developed. In addition, draft legislation covering much of the bill was published for comment, receiving over 300 responses.