Budget Report
This month's budget did not include hugely significant changes for business tax, but the tectonic plates shifted with regards savings. We provide the highlights:
Pensions
The Chancellor has promised that by April 2015 legislation will be introduced to allow savers to withdraw 100% of their pensions over the age of 55. The first 25% of the pension pot will can now be taken out tax free. The amount that may be withdrawn before 55 has been increased from £18k to £30k.
Pensions have long been an excellent way to save on tax. However annuities (the system of annual payments that pensions have been locked into) often provided disappointing returns and locked up most of the cash, drip feeding pensioners the return on their pension pot.
To the entrepreneur mindset, this locking away of cash is unattractive because cash can be invested. Given that 55 years old is ten to fifteen years off retirement age (if business owners choose to retire at all), pension savings can now be reinvested in business within the working life of an entrepreneur.
ISAs and Premium Bonds
Greater flexibilty and a increase in the annual limit to £15,000 have been introduced for ISAs from 1st July 2014.
The allowance for Premium Bond investment is also being increased from £30k to £50k over the next two years.
Incentives to investment
The Chancellor has tried to encourage investment.
Annual Investment Allowance was slated to return to £25k from 1st Jan 2015 but has been increased to £500k.
The Seed Enterprise Investment Scheme designed to encourage equity investment in start-ups has been made permanent.
Rearch and Development tax credits for loss making companies have been increased to 14.5%.
Personal Tax
From 2015 the Personal Tax Allowance will increase to £10,500. From 2015 Self Employed Class 2 National Insurance will be collected via Self Assessment which should be simpler for most people.
Growth
The economy is growing. In fact we are in the fastest growing economy in the Western World with forecasts for 2014 revised upwards to 2.7%.
