Below is a summary of the tax rates and thresholds for 2014/15. A list of the new tax rates are attached and can also be found in the Contractor’s Guide which is available from the portal.
The personal allowance has been increased to £10,000 for 2014/15.
The basic rate tax threshold has been increased to £31,865. The effect is that higher rate tax will be payable on gross income over £41,865.
The additional income tax rate which is payable on income over £150,000 remains at 45%.
The thresholds for national insurance have been increased as follows:
Employees – Directors will now pay National insurance on salaries which exceed £7,956. Employees that are not directors pay National insurance on salaries greater than £663 per month.
The rate of Employee NICs is 12% on salaries between £7,956 – £41,865 (£663 – £3,488 per month).
The rate of Employee NICs on salaries above £41,865 (£3,488 per month) is 2%.
Employer – Employers NIC is payable on directors salaries over £7,956 at a flat rate of 13.8%. For employees that are not directors Employers NIC is payable on salaries greater than £663 per month.
From April 2014 employers are entitled to claim an employment allowance of up to £2,000 per annum against the employer’s NI. This means that if you usually pay less than £2,000 employer’s NI you will have nothing to pay. This allowance will be incorporated into the PAYE tax and NI calculations.
Salary below the tax and NI threshold
The maximum salary that can be paid per month without incurring tax and NI is £663 for 2014/15.
If you received a monthly salary of £641 in 2013/14 we will automatically increase your salary to £663 from April 2014.
For directors only the maximum annual salary that can be paid before incurring tax and NI is £7,956.
The rate of corporation tax for small companies stays at 20%.
The annual investment allowance which gives a 100% write-off on most types of equipment has been increased to £500,000 up to 31 December 2015.
The annual rate of allowance on the pool value not already written-off has remained the same at 18% p.a.
The VAT registration threshold has increased from £79,000 to £81,000.
Capital Gains tax
The capital gains tax allowance has been increased to £11,000 for 2014/15.
The amount of pension contributions that an individual can receive tax relief for in a year has been reduced to £40,000. This applies to both individual contributions and contributions made by a company on behalf of the individual. Where the £40,000 limit is not used it may be possible to carry the unused amount forward for three years.
The mileage allowance stays at 45p per mile for the first 10,000 miles business travel. The rate after 10,000 miles is 25p.
Interest-free director’s loans
The £5,000 limit for cheap or interest free loans to directors and employees has increased to £10,000 from 6 April 2014.