As in many other areas of the Budget, Mr Osborne had stolen some of his own thunder by turning last December’s Autumn Statement into a mini Budget. We already knew that the personal allowance for 2013/14 would be £9,440, £235 higher than previously revealed, and that the starting rate for higher rate tax would fall by £1,025 to £41,450. We had also been promised a 1% increase in that threshold for the following two years.
The surprise in the Budget was that the personal allowance will jump to £10,000 next tax year (2014/15), a year earlier than had been generally expected. If you are a basic rate taxpayer you will gain £112 a year as a result, whereas if you are a higher rate taxpayer with income of up to about £119,000 you will be £195 a year better off. Top rate (now 45%) taxpayers will be £29 worse off because they receive no personal allowance and suffer from a £145 shrinkage in the width of the basic rate band. One point the Chancellor did not make was that the freeze in personal age allowances and the qualifying date of birth (born before 6 April 1948) would continue in 2014/15.
The generous increase in the personal allowance – it will have more than doubled since 2005/06 – was not mirrored elsewhere. The capital gains tax (CGT) annual exemption was confirmed at £10,900 for 2013/14 and will rise by just £100 in each of the following two tax years. The Chancellor also said for the first time that the freeze on the inheritance tax (IHT) nil rate band would be extended until 2017/18, in part to fund the bringing forward of the social care reforms to 2016.
The main rate of corporation tax will fall to 20% from 2015, a move that will result in the unification of corporation tax for all companies, as the small profits rate (formerly small companies rate) is currently 20% and not changing. From April 2014 all businesses will benefit from a new Employment Allowance. This is set at an annual £2,000 for each employer and offsets the employer’s national insurance contribution (NIC) liability. In practice the smallest employers will be the major beneficiaries – the allowance covers just £14,500 of earnings liable to NIC.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.