Personal tax

The Chancellor announced some key measures relating to personal tax.

Income tax

As announced at Budget 2013, from 2014/15 the personal allowance for those born after 5 April 1948 will be increased to £10,000 and the basic rate limit will be reduced to £31,865. The higher rate threshold (the sum of the basic personal allowance and the basic rate limit) will be set at £41,865.

National insurance contributions

For 2014/15, there are no changes to the percentage rate of contribution for Class 1, Class 1A, Class 1B and Class 4 NICs but there are changes to all of the thresholds and limits. The weekly rates for Class 2 and Class 3 NICs will be increased. The Class 1 Upper Earnings Limit and the Class 4 Upper Profits Limit for NICs will continue to be aligned with the point at which higher rate tax becomes payable (£41,865).

Transferable tax allowance for married couples

From April 2015, 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 as long as the recipient of the transfer is not liable to income tax above the basic rate. The transferor’s personal allowance will be reduced by £1,000, and the spouse or civil partner receiving the transferred allowance will be entitled to a reduced income tax liability of up to £200.

State pension

By 2020 the State Pension Age (SPA) will be 66 and by 2028 it will rise to 67. The Chancellor has confirmed that the SPA could rise to 68 by the mid?2030s and to 69 by the late 2040s.

The Chancellor also announced that the cap on benefits rises will not apply to the state pension, which will rise by £2.95 per week from April 2015.

People who have not built up a full entitlement to the state pension are currently allowed to pay voluntary NICs before SPA to increase their entitlement. That opportunity will be extended from October 2015 to current pensioners and to those who reach SPA before 6 April 2016, with the price being ‘a broadly actuarially fair rate’.

The state pension for those retiring from 6 April 2016 will be based on a new single?tier system, under which full entitlement will be reached with 35 years’ contributions. The pension for those with fewer qualifying years’ contributions will be scaled back, but the minimum level will be set between seven and ten qualifying years.

Capital gains tax (CGT)

The annual exempt amount for individuals and certain trustees will be £11,000 for 2014/15 and £11,100 for 2015/16. For other trusts it will be £5,500 for 2014/15 and £5,550 for 2015/16.

For the sale of a property which has at some time been the person’s principal private residence, the final period exemption has previously exempted the gain apportioned to the last 36 months of ownership. This has been the case for many years, but from 6 April 2014 the final period exemption will be reduced to a maximum of 18 months. This may also affect the entitlement to residential lettings relief, given when a property qualifying for the final period exemption was also, at some time in the period of ownership, used for residential letting.

The Chancellor also announced a consultation to begin in April 2014 on the proposal to introduce a CGT charge on future gains made by non?residents disposing of UK residential property from April 2015.

Social Investment Tax Relief

A new tax relief for investment in social enterprise will commence in April 2014. Following consultation, investment in Social Impact Bonds will also be eligible.