Here are the prevailing tax rates, bands and allowances for the 2014-15 tax year.
- The headline rate (which applies to large companies with turnovers of £1.5m of more) is now 21%. It will fall to 20% from April 2015.
- The small profits rate applies to companies which make profits of £300,000 or less per year, and remains unchanged.
- If your company makes profits which span the CT thresholds, then a system of ‘marginal relief’ applies. You can find out more in our Corporation Tax guide.
Value Added Tax
- The registration threshold level is £81,000, and the deregistration threshold is £79,000 (effective from 1st April 2014).
Income Tax – Personal Allowance
- The personal allowance has risen to £10,000 – a significant rise from £9,440. It will rise further – to £10,500 – from April 6th 2015.
- High earners beware, however, since for every £2 you earn over £100,000 per year, you lose £1 of the personal allowance, so the entire allowance will be removed if you earn £120,000 or more.
Income Tax Bands
- The basic rate (20%) applies to income up to £31,865 (it was £32,010).
- The higher rate (40%) applies to income from £31,865 to £150,000.
- The additional rate (45%) applies to income of £150,000 and above.
Dividend Tax Rates
- The same income tax bands listed above are used to calculate your dividend tax liability. Once the 10% tax credit is taken into account, the effective tax rate is listed in brackets):
- The basic rate is 10% (0% – no further tax to pay as dividend owners receive a 10% tax credit automatically which cancels out the tax liability)
- The higher rate is 32.5% (25%)
- The additional rate is 37.5% (a cut from 42.5%) (30.55%)
- For further information, try our tax on dividends overview.
National Insurance Contributions (NICs)
- Limited companies and their employees are subject to Class 1 NICs. The self-employed (sole traders, partnerships) are liable to Class 2 and Class 4 NICs.
- The employers’ NIC rate is 13.8% on weekly earnings above £153. From this tax year, eligible businesses can now reclaim up to £2,000 per year in Employers’ NIC costs from HMRC. See our guide to the new Employment Allowance for more details.
- The employees’ NIC rate is 12% on earnings between £153 and £805 per week, and 2% on earnings above £805 per week.
- Class 2 NICs are £2.75 per week.
- Class 4 NICs are 9% of annual profits between £7,956 and £41,865 per year, and 2% on profits above £41,865 per year.
- Try our guide to National Insurance for further information.
Pensions savings tax relief
- The annual allowance limit has been reduced to £40,000 (from £50,000).
- The lifetime allowance was cut to £1.25m (from £1.5m).
Individual Savings Accounts (ISAs)
- Stocks and Shares ISAs are to be abolished and replaced by a ‘New ISA’ – NISA.
- From 1st July 2014, the total investment limit will rise significantly – to £15,000.
Capital Gains Tax
- No changes to the standard and higher rates of CGT – which remain at 18% and 28% (same tax bands as income tax).
- The lifetime limit for Entrepreneurs’ Relief remains £10m, and the tax rate remains at 10%.
- Each individual as an annual CGT exemption of £11,000.
- The Inheritance Tax Threshold (IHT) stays at £325,000, above which all assets are taxed at 40%.
- A combined threshold of £650,000 applies to civil partners / spouses.
Stamp Duty Land Tax
- No changes to SDLT were announced in Budget 2014.
- No tax applies to property purchases up to £125,000.
- 1% tax on homes between £125,001 and £250,000.
- 3% tax on homes between £250,001 and £500,000.
- 4% tax on homes between £500,001 and £1m.
- 5% tax on homes between £1m and £2m.
- 7% tax on homes worth more than £2m.
Corporation Tax allowances and reliefs
- The Annual Investment Allowance (AIA) has been doubled to £500,000 – until the end of 2015.
- Plant & Machinery – main rate remains at 18%, and the special rate stays at 8%.
- First year allowances remain at 100%.
- The England standard multiplier is 48.2p
- The England ‘small business’ multiplier is 47.1p (if your property has a rateable value of £18,000 or less – or below £25,500 in Greater London).