There was more to the Budget 2014

By James Pinchbeck Partner, Streets Chartered Accountants

Given the continued rhetoric from government that there are still difficult decisions to take, and despite continued signs of improvements in our national economy, austerity measures are still two words very much in the fray.

Perhaps more cynically too, is that it is not this year’s Budget but the pre-election 2015 Budget that will create more headline grabbing news and interest. You may then feel it is not worth reading on or trying to find out how the Budget affects you.

However, such an approach does come with a severe financial health warning. The danger is, given the fact that the Budget is not the only time changes are announced, the advent of the Pre Budget or the current administration Autumn Statement invariably includes changes to come either in the next and or future tax years. Therein lies the pitfall of blissfully thinking that the changes announced, will have no overall impact on you, and that Budgets both for the UK plc and individuals are fiscally neutral.

Over a period of time, you may find that the impact of tax legislation on you or your business has changed significantly and that you are neither up to speed nor applying tax treatments correctly, or worse not taking advantage of those that are currently in place.

Whilst more time is needed to really digest the detail in the Budget 2014, there does seem to be a number of welcome announcements for both business and individuals alike.

In terms of individuals…

All those that pay income tax will no doubt welcome the proposed increase in the starting point at which it is paid to £10,500 next year, along with the previously announced increase to £10,000 this year. For working parents, the proposed introduction of financial support for childcare into 2015, will be most welcome.

Those looking to buy their first home can hopefully benefit from the extension to the Help to Buy equity schemes which will now run until 2020.

Savers too (though we are not deemed to be a nation of savers), are set to benefit from the proposed changes to ISA, Individual Savings Accounts, which offer tax free benefits whereby the annual investment allowance is being increased to £15,000 along with the flexibility to spread investment and move investments between cash and shares/stocks. Savers will also be able to benefit from the increase in the annual savings allowance in premium bonds from £30,000 to £40,000 and the abolition of the 10% rate of tax on savings income. This is along with proposed beneficial changes to the tax treatment of pensions draw down and the need to buy an annuity.

Now turning to business…

The headline grabber was probably the announcement to increase the Annual Investment Allowance from £250,000 to £500,000. Whilst the higher figure may be something they could only dream about, an increase in the limit as opposed to any decrease must help support any key business investment decisions. This is vital if businesses are to share in the growth in the economy that we are experiencing nationally. There could be a danger that businesses who don’t start to adopt a growth strategy may find that in real terms their market share is declining.

Given the importance placed on manufacturing and overseas trade in both balancing our books and as a driver for economic prosperity, the announcement of the significant increase in export finance of £3bn from government must be good news. Those looking to develop overseas business will also benefit from a lower rate of air duty on long haul flights. Equally supportive was the announcements around the increase in R&D tax reliefs and SEIS.

No doubt and not least, many small businesses will welcome the one off £2,000 cash allowance available through employers National Insurance Contributions. Retailers too will benefit from a £1,000 reduction in business rates.

Was it all rosy?

No, and not least for tax professionals and accountants advising their clients.

Whilst tax evasion has always been unacceptable, the Treasury over recent years has sought to close tax schemes which seek to reduce a personal and corporate tax liability. Avoidance however is not frowned upon as much as evasion. The underlying trend is that you will have to pay the tax which is due and seek to reduce any such liability by consultation with the Revenue afterwards. This and the proposed announcement to increase Revenue power and resources means that the ability not to pay what is due is to become a rare occurrence.

The fear from the tax profession is that clients will believe that there is nothing they can do, however experience shows that increasingly simple, effective, and acceptable tax planning is being overlooked.

Locally, Lincoln Cathedral can hopefully receive some financial support from the announcement that Britain’s crumbling cathedrals are to get an extra £20million for repairs. The money will be used for renovations ahead of the centenary of the First World War later this year. George Osborne wants cathedrals to act as a ‘focal point’ for local and national commemorations, after the Church of England warned of an £87million shortfall in funding for repairs.

And with the 800th anniversary in 2015, Lincoln’s one of only four remaining Magna Cartas will benefit from the proposed money to support its commemoration.

Perhaps then whilst the Budget was billed not to have a ‘wow factor’, it does with its individual elements impact on all of us. For businesses and individuals alike, the danger will be to fail to really assess its impact and how best we can take the advantages and disadvantages it presents. Certainly as we approach the end of the last and the start of the next financial year, it must be a good time to take stock and seek professional advice.

James Pinchbeck is Partner at Streets Chartered Accountants, a top 40 UK accountancy practice. James, as a specialist in marketing professional services, is responsible for the development and implementation of the firm's strategic marketing as well as its engagement in the community it which it works and serves. His role allows him to capitalise on his broad interest in the national and local economy as well as his passion for enterprise. As part of his wider interest in enterprise, marketing and education, James is a board member of NBV – the East Midlands Enterprise Agency, an FE College Governor and a board member of the University of Lincoln’s Business School. He is also an Institute of Director’s past Branch Chairman.