Belfast Telegraph

What we've learned about tax changes before election

By Louise Williams

The Chancellor will this week deliver his final Budget before what's expected to be an incredibly tight general election.

As this is a general election year it will not be the only Budget of 2015. Following the Autumn Statement in December, the draft Finance Bill is already making its way through Parliament and Royal Assent is expected on March 24 - but some of the provisions in it will not make the final cut due to lack of parliamentary time and are likely to be introduced in a later Finance Bill.

However, this Budget will still contain a lot of measures that affect Northern Ireland households and businesses.

The shake-up to pensions that will mean people of retirement age have more freedom to spend their pension pots how they wish has already been well trailed. Similarly, corporation tax devolution to Northern Ireland has long been debated and we may hear a little more about the progress of legislation this week.

But the Chancellor also needs to be able to show he is sticking to his plan of cutting the deficit, which may curtail any big giveaways.

So, what do we know is definitely in store from a tax perspective on March 18?

Income tax: We already know that the standard personal allowance for 2015/16 will be £10,600 but with higher than expected tax receipts and continuing low inflation, the Chancellor may increase this to a target of £11,000 in the near future.  The age allowance for those born before April 6, 1938 is to be frozen at £10,660 for 2015/16 with the aim of the standard and age allowance being merged. If the Chancellor does increase the standard allowance to more than £10,660, then it would be expected the age allowance will be increased to match.

Currently, when a taxpayer dies, the investment they held in an ISA wrapper loses its tax exempt status. But ISA regulations are to be changed where these investments are left to the deceased's spouse or civil partner so that the spouse or civil partner will receive an extra ISA allowance equal to the value of the deceased's ISA savings at the date of death. 

This is in addition to the surviving spouse or civil partner's own ISA allowance.

Payroll issues: As from April 6, 2016, the "higher paid" threshold of £8,500 will be abolished for the purposes of taxing benefits in kind. As a result nearly all employees will be taxed in the same way on benefits received. However, there are two exemptions for ministers of religion who earn less than £8,500 per annum and carers who are provided with accommodation in the home of the person they care for. The system of applying for a dispensation will also be scrapped from that date.

Also from April 6, 2016, employers will be able to elect to payroll cars, car fuel, medical insurance and subscriptions such as gym memberships and therefore remove the need to report these items on the form P11D.

There will be a new blanket exemption which will allow employees to be paid a scale rate for certain qualifying expenses, rather than be reimbursed for the expenses actually incurred.  These scale rates will be set by regulations yet to be announced.

As from April 6, 2015, trivial benefits worth no more than £50 per employee will be free of tax and National Insurance.  However, there are conditions attached this exemption - they must be provided to more than one person during the year and be impractical to calculate the cost of the benefit provided to each person. 

Also, the provision of the benefit should not be part of a salary sacrifice arrangement or in recognition of particular services. Capital gains tax: A surprise in the Autumn Statement was the introduction of a new restriction on entrepreneurs' relief for gains arising on the transfer of goodwill on the incorporation of a business.

This new restriction is relevant for all incorporations after December 3, 2014.

Before December 3, 2014 taxpayers had to choose between claiming entrepreneur's relief on a gain or deferring the gain using an enterprise investment scheme or social investment tax relief.  The Finance Bill will change this so investors can use these schemes to defer their capital gains and still claim entrepreneurs' relief at a later date.

As from April 6, 2015, non-residents, who were previously not liable to UK capital gains tax, will become liable to capital gains tax on the disposal of residential property.  Only the gain accruing from April 6, 2015, onwards will be subject to this new charge.

Inheritance tax: Two exemptions from inheritance tax are to be extended: Medals and other rewards - there is already an exemption for the value of medals or decorations awarded for valour or gallantry for transfers occurring after December 3, 2014. This is to be extended to include all decorations made by the Crown or other countries to members of the armed services or emergency services for achievements or services in public life.

Emergency services - Members of the armed forces estates are exempt from inheritance tax if they die on active service. This exemption is now extended to members of the emergency services (fire, police, ambulance and coastguard).

RSM McClure Watters will be publishing a summary of the Budget on its website and members of its tax team are available to answer any queries.

Louise Williams is  senior tax manager, RSM McClure Watters

Belfast Telegraph