With the tightening of the government’s purse strings continuing unabated, this may have seemed like an opportune moment to start increasing tax rates and slashing personal allowances. However, and thankfully, this is not the style of Mr Bell, or indeed Mr Teare, and rather the 2014 Budget contains very few surprises.
For the first time in 3 years, there is a small increase in the single person and married couple/civil partner allowance. However, the age allowance is cut from £2,020 per annum to £1,000, which will impact upon the disposable income of some pensioners.
All income tax rates for individuals and companies remain exactly at their 2013/14 rates and, broadly, there has been little change to national insurance rates and thresholds.
At a personal level, what this generally means is that, alongside cuts to other benefits and with inflation bubbling around the 3% mark, some of us are likely to be a little worse off financially than we were 12 months ago. This is not an unexpected outcome in the current climate, with government committed to rebalancing its finances by 2015/16. On this point, it is pleasing to note that we remain on target to achieve this rebalancing on schedule, notwithstanding any further shocks to the system in the intervening period. Whilst there is cause for cautious optimism, I predict it unlikely that the current trend of reforms and cuts to public services will simply dissipate beyond 2015/16. In my opinion, this is an area which requires ever closer scrutiny to ensure the long term health of our economy.
New Tax Cap Measures
One announced change that caught my eye was with regard to the tax cap for wealthy individuals and the requirement from 2014/15 to have to elect to be subject to the cap. Interestingly, by making the election there is now a commitment from the taxpayer to be subject to the tax cap for the next 5 years which can only be revoked in ‘exceptional’ circumstances. Whilst this does provide certainty for the taxpayer and government, this could also be viewed as a targeted anti-avoidance measure.
In conclusion, from both a personal and business perspective the budget broadly spelt ‘business as usual’, which means one less distraction when considered alongside many of the external pressures we are currently facing from the likes of the US and UK FATCA.