Changes to Personal Tax 2014 – 2015

Income Tax Changes

People born after 5 April 1948 will be entitled to a basic personal allowance for 2014/15 of £10,000 as announced in the 2013 spring Budget. The tax rates and bands will be as previously announced.

Transferable allowance for married couples

The Chancellor confirmed that a spouse or civil partner who is not liable to income tax or not liable above the basic rate for a tax year will be entitled to transfer £1,000 of their personal allowance to their spouse or civil partner from April 2015. The recipient of the transfer must not liable to income tax above the basic rate. The spouse or civil partner who receives the transferred allowance will be entitled to a reduction in their income tax liability of up to £200. In future years the transferable amount will be uprated in proportion to the increase in the personal allowance.

Class 3A national insurance contributions (NICs) for enhanced state pension

A new class of voluntary NICs (Class 3A) will be introduced from October 2015. This will give those who reach state pension age before 6 April 2016 an opportunity to boost their Additional State Pension (i.e. the State Second Pension).

Abolition of employer NICs for under 21s

From 6 April 2015 employers will no longer be required to pay Class 1 NICs for any employee under the age of 21 on their earnings up to the upper earnings limit.

CGT annual exempt amount

The Chancellor confirmed that the CGT annual exempt amount will be £11,000 for 2014/15. It will then be £11,100 for 2015/16.

Capital gains tax (CGT) private residence relief

The final period CGT exemption for main residences will be reduced from 36 to 18 months from 6 April 2014. This CGT exemption applies to a property that has been a person’s private residence at
some time. The property owner can benefit from the exemption even if they are not living in the property when they dispose of it and they may be claiming private residence relief on another property at the same time.

CGT non-residents and UK residential property

A CGT charge will be introduced on future gains made by nonresidents disposing of UK residential property from April 2015.

Employee share schemes annual subscription limits 2014/15

There will be an increase in the individual limits on the ‘free’ shares under share incentive plans (SIPs) for 2014/15. The increase will be from £3,000 to £3,600 a year. The individual limits on the ‘partnership’ shares employees can buy will also be increased from £1,500 to £1,800 a year (or 10% of an employee’s annual salary). For save as you earn (SAYE) schemes, the amount that employees can save and apply towards the purchase of shares for 2014/15 will be increased from £250 to £500 a month.

Employee ownership

The government will introduce three new tax reliefs to encourage and promote indirect employee ownership:

  • From April 2014, disposals of shares that result in a controlling interest in a company being held by an employee ownership trust will be relieved from CGT.
  • Transfers of shares and other assets to employee ownership trusts will also be exempt from inheritance tax providing certain conditions are met.
  • From October 2014, bonus payments made to employees of indirectly employee-owned companies which are controlled by an employee ownership trust will be exempt from income tax up to an annual cap of £3,600.