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Budget 2015, initial reactions from Smith & Williamson

Budget 2015, initial reactions from Lee Blackshaw, Manchester tax partner at Smith & Williamson, the accountancy and investment management group Individuals: winners look to be lower to middle income earners Winners look to be lower to middle income earners. The prospect of raises in the income tax threshold, increase in the marriage allowance, upping of the 40% tax threshold not to mention the new flexibility surrounding ISAs and with Help to Buy ISAs. There will be no ‘abolition’ of tax returns per se, but rather an evolution through pre-populating tax returns. People will still have to check the data and it will be assessed year on year; provision will be necessary for those without online access, such as the elderly. On pensions, the annual allowance of £40k was retained which is again helpful to the self-employed and business owners, and others with irregular income, as well as those who have taken career breaks and need to make up for periods when they were unable to make pension contributions, plus civil servants. However, the cut in the lifetime allowance to £1million will bring many more thousands of people into this net than any previous reductions. Some people in their 40s will have to consider the tax implication of funding their pension as they will be far more likely to hit the lifetime allowance. Many doctors, senior nurses and senior teachers will be affected, as at £1m the lifetime allowance will catch public sector employees on around £75k. Support for employers and the self employed The Chancellor set out plans to continue to encourage growth through assistance to employers and business generally. The Chancellor also underlined his support for employers and businesses with support for cuts in NICs for apprentices, the under 21s and a commitment not to cut the annual investment allowance down to the original £25k. However, the resulting figure is still unknown. A commitment to allow Manchester and Cambridge to keep their business rates for local investment look set to provide a great financial fillip to these areas – and if extended could be an excellent means to boost regional infrastructure. A specific group of taxpayers who will benefit include farmers with an opportunity to average income over five years. This will to some extent add complexity, but will potentially lead to some welcome relief for those on fluctuating incomes, reducing the chance of wasting personal allowances. The growing army of self-employed will benefit from the abolition of class 2 NI, the benefits of which have been outweighed by the administrative costs in many cases. Individuals in self assessment will also potentially benefit from a simplified online tax system, which is expected to replace traditional returns – although most of these people have been sending data electronically to HMRC for many years.

Clamp down on evasion – time running out for using disclosure facilities

The government’s proposal to toughen sanctions for those who continue to evade tax is no surprise. What is more unexpected is the announcement to close the existing disclosure facilities for those with something to declare early. This is due to affect facilities such as the Liechtenstein Disclosure Facility (LDF) and Crown dependency facility, which will close at the end of 2015, instead of April and December 2016 respectively.

The main alternative will be the new tougher ‘last chance’ disclosure facility that will be offered between 2016 and mid-2017, with penalties of at least 30% on top of tax owed and interest. This will offer no immunity from criminal prosecutions in appropriate cases.

This is providing a very sharp twist of the arm to anyone still hesitating before coming forward; the alternative is likely to be a criminal conviction.

This was posted in Bdaily's Members' News section by Smith & Williamson .