November 1st, 2014 Business News
Following the 2014 budget, a range of significant measures were introduced to bring greater flexibility to individuals who want to access funds in defined contribution pension schemes.
Following the 2014 budget, a range of significant measures were introduced to bring greater flexibility to individuals who want to access funds in defined contribution pension schemes. Some changes to the current restrictive rules came into effect from 27 March 2014, whilst further measures will follow in April 2015 after a period of consultation:
Pensions – Immediate Measures:
- Capped drawdown – the cap was increased from 120% to 150%
- Flexible drawdown – the income limit was reduced from £20,000 to £12,000 p.a.
- Trivial commutation – the limit was increased from £18,000 to £30,000
- Small pots – the limit was increased from £2,000 to £10,000 and the number of small pension pots that can be taken as lump sums was increased from two to three.
April 2015 changes:
- Those who choose to draw down more than their tax-free lump sum from a defined contribution pension will be able to benefit from further tax-relieved pension savings, and make further tax-free contributions to a defined contribution pension, of up to £10,000 per year.
- Increase the minimum age at which people can access their private pension from 55 to 57 in 2028.
Entrepreneurs’ Relief (ER)
Following the 2014 Finance Act, the conditions regarding Entrepreneurs’ Relief (ER) remain unchanged. ER reduces the amount of capital gains tax on a disposal of qualifying business asset should certain conditions be met and thus relevant to anyone that owns a business directly or is a member of a partnership that owns a business. It is therefore important to do some careful planning on incorporation to maximise the relief available.
- Every individual is entitled to a lifetime cumulative £10 million limit on whole or part disposals
- Husbands and wives get £20 million between them
- The one year holding period requirement still remains
- Gains from disposal of a business (whole or part) are taxed at 10%
Seed Enterprise Investment Scheme
Introduced from 6 April 2012 The Seed Enterprise Investment Scheme, also known as SEIS, has now become a permanent feature in the UK tax system, following the 2014 Finance Act. The scheme provides tax relief for individuals prepared to invest in new and growing companies. In return, investors can obtain generous income tax and capital gains tax breaks for their investment, whilst companies can use the relief to attract additional investments to develop their business.
- A qualifying investor will be able to invest up to £100,000 into qualifying companies in a tax year
- Income tax relief will be available on 50% of the sum invested as long as the shares are held in that company for at least 3 years
- Unused relief in one tax year can be carried back to the preceding tax year if the relief can be used in that year
- The maximum amount that a company can attract in investment qualifying for SEIS is £150,000 in total, and the company must not have net assets of more than £200,000 before any SEIS investment.
Social Investment Relief
Under Social Investment Relief, individuals making an eligible investment in social enterprise at any time from 6 April 2014 can deduct 30% of the cost of their investment in the year up to a maximum of £1million. The minimum period of investment is 3 years. There are a significant number of other conditions that have to be satisfied by the investor, the investment and the social enterprise. We will be more than happy to disclose should further information be necessary.
CGT charge on non-residents selling UK dwellings
Non-residents who make gains from selling UK residential property will fall within the scope of capital gains tax for the first time from 5 April 2015. Non-residents include individuals, partnerships, companies, trusts and offshore funds. It is likely that HMRC will charge non-resident individuals at the capital gains tax rates of 18% and 28% taking into account the level of their UK income and gains. Non-resident individuals will also be entitled to the capital gains tax exemption. The rate of tax applicable for companies though has yet to be agreed by HMRC.
Need specific advice?
Should you have any specific questions in relation to the above, or if you wish to obtain specific advice on how these changes affect your business, please contact Howard Moss at Kingswood.