Reflections on the 2014 Budget

Gorgeous George called it “a budget for Makers, Savers and Doers”. So that should cover most of us then. But was it? For a full run-down of the runners and riders, take a look here. For our more leisured reflections, read on.

Keeping track of Annual Investment Allowance (AIA) is getting to be a full-time job. Up and down like a… well, let’s draw a veil over what it’s like; but this time it’s going back up to £500,000 (the highest ever) until 31 December 2015. So it’s effectively 100% tax write-off for plant and machinery in the year of acquisition for all except the biggest businesses – and of course those which don’t qualify for AIA at all, such as partnerships involving companies. As to which, (partnerships involving companies) the hugely complex and obscure changes to the rules on taxation of “mixed member” partnerships come into full force and effect from 6 April 2014, with no indication in the budget announcement or elsewhere of any softening, modification or even clear explanation of the changes thrust onto an unsuspecting world last December: very disappointing.

Unexpectedly, the special rules on “expensive” residential properties applying to properties valued at over £2m are to be extended downwards to properties valued at over £500,000. Thus:

  • From Budget Day, “non-natural persons” (broadly companies) buying such properties will be charged Stamp Duty Land Tax at the penal rate of 15%.
  • From April 2015, the Annual Tax on Enveloped Dwellings (ATED) will be extended to £1m+ properties (with ATED set at £7,000).
  • From April 2016, ATED will be extended to £500,000+ properties (with ATED set at £3,500).

As previously announced, there will be consultation on extending the UK CGT charge to non-residents making gains on the disposal of UK residential property with effect from April 2015. It does, incidentally, seem odd that at £500,000 a house is deemed to be cheap enough to come within the government’s “Help to Buy” scheme (which tops out at £600,000), yet costly enough to come within rules targeting “expensive dwellings”.

A small but welcome change is the decision to make permanent “Seed EIS” relief (originally intended to be a relief of limited duration); this will also extend to making permanent the CGT relief for reinvesting into SEIS shares.

Savers get a few crumbs thrown to them by the government – which cynics would say is a few crumbs more than deposit-takers throw them in interest nowadays.

  • Cash ISAs and stocks-and-shares ISAs are to be effectively merged from July 2014 and the annual limit increased to £15,000.
  • The 10% Income Tax rate on “non-dividend savings income” is to be reduced to 0% and the band extended to £5,000. However, this is not quite what it appears to be: the way the rules work mean that anyone with any significant level of earnings was never likely to benefit from the 10% rate and is equally unlikely to benefit from the 0% rate.
  • If you’re over 65 you can invest in a new bond which will “provide certainty and a good return for those who have saved all their lives and now rely on their savings for income”.  True, you have to wait until January 2015 (presumably because if you were allowed to invest before then you might have forgotten about the Government’s munificence by the time the election comes round: age plays havoc with memory, you know); the maximum you can invest is just £10,000; and the “good return” is currently expected to be 2.8% on a one-year bond (which is taxable) so the income will barely cover the cost of your Daily Mail; but every little helps.
  • From June 2014 the maximum you can invest in Premium Bonds goes up from £30,000 to £40,000 (with a further £10,000 increase in the following tax year). Furthermore, the number of monthly £1m prizes will double from August; so your chances of hitting the jackpot increase from minuscule to only half as minuscule.

For future pensioners, more basic changes are promised. Billed as “the most fundamental changes in the way people access their pension in almost a century”, these are to be introduced from April 2015 after appropriate consultation. For once, the description may not be mere hyperbole: the proposals (which affect only “defined contribution” schemes) appear genuinely game-changing. Essentially, it’s proposed that

  • the requirement to buy an annuity will be abolished; and
  • all restrictions on drawing benefits will be removed: on reaching age 55 you will be able to extract what you wish, subject only to paying tax at your marginal rate on what you take.

On the face of it, this looks to increase the attractiveness of formal pension planning hugely, though the devil, as always, will be in the detail. Meanwhile, from today, the existing arrangements are relaxed in a number of ways to permit easier and more flexible access to value within pension schemes.

However, the single change which may in the short term have the most substantial cash effect on most families was not in the Budget statement at all but was announced the previous day: that is the extension and acceleration of the Government’s child-care subsidy. The contribution remains 20% of qualifying costs but the maximum contribution rises from £1,200 to £2,000. Quite what will be the reaction of single-earner households (who, with the exception of “one-parent” families, are denied the hand-out) is questionable (and possibly unprintable), especially if they have suffered the withdrawal of Child Benefit under last year’s reforms…

Finally, also announced today is the replacement of the existing £1 coin by a new dodecagonal design, apparently inspired by the old “threepenny bit” which disappeared with decimalisation in 1971. It would seem somehow poetic if inflation over the 40-odd intervening years had reduced the pound to the buying power of 3d in old money. In fact, it’s not quite true: it’s about one shilling and fourpence.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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