April 2015 tax changes – five things you need to know

Every April, the government tends to roll out new taxation changes and this year is no exception. So what changes will take effect in April 2015? Our Chief Accountant, Emily Coltman FCA, highlights five key things to keep in mind.

VAT thresholds increased

  1st April 2014 - 31st March 2015 From 1st April 2015
VAT registration threshold £81,000 £82,000
VAT deregistration threshold £79,000 £80,000

Starting from 1st April 2015, the VAT registration threshold increased to £82,000 a year. That means that you must register your business for VAT if its VATable sales are more than £82,000 a year.

The VAT deregistration threshold also increased by £1,000, so that means that you can deregister a VAT-registered business if its VATable sales fall below £80,000 a year.

Personal allowance increased

  6th April 2014 - 5th April 2015 From 6th April 2015
Personal allowance £10,000 £10,600

The personal allowance is the amount of income that any individual with earnings below £100,000 a year can earn free of tax. Starting 6th April 2015, this allowance goes up from £10,000 to £10,600.

For individuals who earn over £100,000, the personal allowance also goes up to £10,600. However, this is then reduced according to how much money they earn – specifically, the personal allowance reduces by £1 for every £2 that individuals earn over £100,000. That means that if someone earns £121,200 or over in 2015/16, their personal allowance would reduce to zero (this assumes that they were born after 5th April 1948 – see below).

HMRC has also introduced a change to personal allowance rates for older individuals. Previously, the personal allowance for individuals born between 6th April 1938 and 5th April 1948 was higher than for individuals born after 5th April 1948. From 6th April 2015 the personal allowance for both these age groups will be the same. There is still an extra allowance of £60, however, for anyone born before 6th April 1938 – so their personal allowance would increase to £10,660.

National Insurance thresholds increased

  6th April 2014 - 5th April 2015 from 6th April 2015
Employee’s National Insurance threshold £153 a week £155 a week
Employer’s National Insurance threshold (employee over 21) £153 a week £156 a week
Employer’s National Insurance threshold (employee under 21) £153 a week £815 a week

The Employee’s National Insurance threshold has increased to £155 a week, meaning that employees will start having National Insurance deducted from their wages from 6th April 2015 once they earn £155 or more a week. This means that even if you earn less than the personal allowance, you may still have to pay National Insurance; anyone with a salary between £8,060 and £10,600 will need to pay National Insurance at 12% for anything earned above the £8,060 level.

The Employer’s National Insurance threshold has also increased. If your business employs staff, you’ll start paying employer’s National Insurance on their wages above £156 per week, or £8,112 per year, up from £153 a week. This is unless the employee is under 21 years of age, in which case you won’t start paying employer’s National Insurance until they earn over £815 per week or £42,380 per year. The threshold for people under 21 is new for this tax year.

Don’t forget that the £2,000 Employment Allowance is available again for employers for the 2015/16 tax year. Using this allowance, you can set £2,000 against your overall Employer’s National Insurance bill. Check out this article for more details about the Employment Allowance.

Class 2 National Insurance increased

  6th April 2014 - 5th April 2015 From 6th April 2015
Class 2 National Insurance £2.75 per week £2.80 per week

If you’re a sole trader or a partner in a partnership, your Class 2 National Insurance bill will go up from £2.75 per week to £2.80 per week.

The Budget of March 2015 promised abolition of Class 2 National Insurance, but a date for this has not yet been set, so you’ll need to continue paying Class 2 National Insurance as before.

If your profits are under the Small Profits Threshold, which is £5,965 a year from 6th April 2015, you won't have to pay Class 2 National Insurance, but be aware that this exemption might affect your entitlement to State Pension and other state benefits – it’s worth talking this through with your accountant.

Reduced tax on savings income

  6th April 2014 - 5th April 2015 from 6th April 2015
Starting rate band for savings tax savings up to £2,880 savings up to £5,000
Rate of tax for savings on starting rate band 10% 0%

Up to 5th April 2015, any savings income (i.e. interest that banks pay out), up to £2,880 a year was taxed at 10%. From 6th April 2015 the level of this “starting rate band” will go up from £2,880 to £5,000, and the rate of tax on this income will fall to 0%.

What this means in practice is that if your taxable income for 2015/16 is under £15,600 (the Personal Allowance plus the starting rate band), and part of that is savings income, you’ll be able to make a claim to either have your bank pay you interest tax-free, or for a refund of any tax the bank has already deducted..

If you want to find out more about how any of these rates may affect you and your business, it’s worth speaking to your accountant.

This blog post was first published on 3 April 2015 and was last updated on 24 April 2015.

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