Budget 2014: What does it mean for housing? 0
Federation response 1
Key housing announcements Help to Buy: equity loan scheme will be extended to March 2020 to help a further 120,000 households to buy a newbuild home A new garden city in Ebbsfleet with 200 million investment in infrastructure to kick-start development 2
Further supply measures Builders Finance Fund of 500 million for small builders to unlock small sites to deliver 15,000 homes A new estate regeneration kick-start fund of 150 million for large housing estates through repayable loans Package of 150 million repayable fund to help to help provide 10,000 plots for custom build Combined, measures in the budget intended to deliver 200,000 new homes by 2020 3
Welfare cap The overall welfare cap will include housing benefit, except where the claimant is also in receipt of income based Job Seeker s Allowance The cap for 2015/16 will be set at 119 billion, rising in line with the OBR forecasted spend each year after that until 2018/19 Further welfare cuts may be needed to guarantee spending remains below this level and could make it more difficult for people to pay rent 4
Other announcements Strategic Land and Property Review concluded - identified scope to release 5 billion from government land and property, creating opportunities for housing and economic development. At Budget 2013 the Government committed to implement zero carbon homes from 2016. The government will shortly publish its response to last year s consultation. The government will consult on the design of a priority Right to Move for social tenants to increase mobility for work. 5
Federation response Modest steps taken to increase supply but need more immediate impetus e.g. land release, extending guarantees, increasing borrowing capacity Garden city will only make a difference if first of many and must not replace homes built elsewhere Is it accelerating supply rather than generating additional supply? 6
Federation response Help to Buy will help some people but long term it risks fuelling a house price bubble Difficult to demonstrate it leads to additional new homes that would not have been built anyway or is the most effective way of using public investment How will Government withdraw support in future? Welfare system should ensure housing is affordable and not jeopardise new supply by undermining housing benefit Building more affordable homes would be a more effective control on the housing benefit bill 7
Budget 2014: The Economic Outlook 8
The Deficit Today 9
Deficit bn 10
Debt as a % of GDP 11
Unemployment Rate 12
Annual Growth Forecast 13
Budget 2014: Income Tax and Pensions 14
Rates and Allowances 2014/15 2015/16 Personal allowance 10,000 10,500 Income tax Higher rate threshold: 40% Additional rate: 45% Over 41,865 Over 150,000 Over 42,285 Over 150,000 Inheritance tax threshold 325,000 325,000 Capital gains tax annual exemption 11,000 11,100 Capital gains tax rate 18% / 28% 18% / 28% Entrepreneurs relief lifetime limit 10 million 10 million 2015/16 - Transfer of 10% of Personal Allowances between spouses liable to basic rate tax From April 2015, 10% starting tax rate for savings income replaced with a new 0 % rate up to 5,000 15
Supporting Savers New Individual Savings Accounts (NISA) Introduction of New Individual Savings Account ( NISA ) from 1 July 2014 Annual subscription limit increased to 15,000 for 2014/15 Increased flexibility between cash and stocks / shares Maximum subscription of 11,880 (cash and shares) between 6 April and 30 June 2014 Transfer of previous years ISA savings to NISA Minimum age limit of 16 years old for Cash NISA (18 years for stocks and shares account) Junior ISA ( < 16 years old) annual subscription limit increased to 4,000 16
Supporting Savers Premium bonds Limit increased to 40,000 from 1 June 2014 and to 50,000 from 2015 Pensioner savings bonds Introduction of market leading fixed rate savings bonds for over 65s Available from January 2015 10,000 limit per bond 17
Pensions DC options 27 March 2014 25% tax free lump sum - remains Trivial commutation take as lump sum if pension savings from one source < 10k 2k or from all sources if < 18k 30k in total Drawdown no limits on amount you you can can withdraw each (taxed year if at income marginal of at least rate) 12k 20k p.a., otherwise limited to 150% 120% of standard annuity Minimum retirement age - 55 Increases in line with SPA April 2015 x Buy an annuity to provide a fixed annual income during your life Free impartial guidance at retirement Ban / severely restrict DB transfers to DC? 18
Pensions Changes to pensions tax allowances from 6 April 2014 a reminder Annual Allowance to reduce from 50,000 to 40,000 Lifetime allowance to reduce from 1.5m to 1.25m Protection options available need to consider prior to 6 April 2014 19
Other tax relief changes Principal private residence relief (PPR) Exemption period reduced to 18 months from 6 April 2014 Seed Enterprise Investment Relief Introduced in 2012 to support small, early stage companies raise external finance Permanent extension of SEIS Attractive tax reliefs for investors: 50% income tax relief Tax free gain after 3 years CGT exemption for gains reinvested in SEIS shares HMRC advance clearance procedure 20
Employment Taxes Pre-Announced Changes From April 2014: 2,000 employers NIC allowance Threshold for the small loans exemption increased from 5,000 to 10,000 Changes to the intermediaries legislation Changes to legislation on company cars to ensure individuals make payments for private use of a company car or van in the relevant tax year From 6 April 2015, no longer required to pay Class 1 secondary NICs on earnings up to the upper earning limit (UEL) for employees under the age of 21 From Autumn 2015, parents can claim 20% support on up to 10,000 per year of childcare costs for each child under 12 21
Employment Taxes Budget Changes Company car tax - increase by 2% for cars emitting more than 75g/km CO2, to a maximum of 37%, in 2017 to 2018 and 2018 to 2019 From October 2014 exemption of up to 500 for the cost of employee medical treatment CIS consultation in Summer 2014 Fuel and van benefits to increase with RPI from 2015 Office of Tax Simplification Consultation on 4 issues: abolishing the 8,500 threshold for P11Ds voluntary payrolling of benefits a trivial benefits exemption a general exemption for non-taxable expenses Review the rules underlying the tax treatment of travel and subsistence expenses 22
Employee Share Schemes Limits on all-employee schemes confirmed as increasing from 6 April 2014 SAYE 500 per month maximum increased from 250 SIP maximum of 9,000 of shares across 3 SIP components (partnership, matching, free shares) previously 7,500 Share scheme annual reporting Electronic filing required for 2014/15 registration of schemes from 7 April 2014 Paper returns for 2013/14 still required 23
Budget 2014: Business Taxation 24
What We Already Know? Corporation Tax rates 21% from 1 April 2014 20% from 1 April 2015 25
What s New? Annual Investment Allowance Allowance doubled from 250,000 to 500,000 from 1 April 2014 to 31 December 2015 Reverts to 250,000 from 1 January 2016 26
What s New? R&D Tax Credits Payable tax credits for SME s increased from 11% to 14.5% Applies from 1 April 2014 SME defined as <500 employees and turnover < 100m and/or BS < 86m R&D Calculation k Loss before R&D expenditure (500) R&D expenditure 1 (100) Net loss before tax (600) SME R&D enhanced deduction 2 (125) Taxable loss (725) Total R&D deduction (1+2) 225 Payable tax credit @ 14.5% 32.625 Effective rate of refund 32.63% 27
What s New? Enterprise Zones Extension of qualifying period from 2017 to 2020 Businesses in these zones qualify for 100% capital allowances on new qualifying plant and machinery 28
Base Erosion and Profit Sharing Current OECD Position 15 Actions to be completed by 2015 Comprehensive plan to bring international tax rules into the 21st Century Latest OECD Discussion Drafts: Country-by-Country reporting Prevention of Treaty Abuse Hybrid Mismatch Arrangements UK Response Commitment to the OECD action plan and timetable. Acknowledgment that the current rules are not fit for purpose. Must be consistent with Government s wish to promote UK growth and competitiveness. Must be efficient to administer from both a Government and business perspective. 29
Definition of a charity for tax purposes further rules Consultation announced on 14 March to include a tax motive test two options securing of a tax advantage for any person is neither the main purpose, nor one of the main purposes, of any arrangements in the course, or as a result, of which that body was established securing of a tax advantage for any person is not the main purpose of any arrangements in the course, or as a result, of which that body was established Feedback requested by 11 April Which do you prefer? We would like to find a legislative solution that would prove effective against extreme cases of abuse without risking concern to genuine charities 30
Other charity measures Targeted reliefs for specific charities Air ambulances and inland safety boat charities grant equal to VAT suffered on fuel for 5 years Repair grants for cathedrals The government will provide 20 million for a grant scheme for repairs to cathedrals Theatre tax relief The government will introduce a new theatre tax relief at 25% for qualifying touring productions and 20% for other qualifying productions, with effect from 1 September 2014 Stamp duty land tax (SDLT): charities relief As announced at Autumn Statement 2013, the government will legislate to make it clear that partial relief from SDLT is available where a charity purchases property jointly with a non-charity Charity will be able to claim relief from SDLT on the proportion of the purchase attributable to it. The changes will take effect from the date on which Finance Bill 2014 receives Royal Assent 31
Annual tax on enveloped dwellings rules expanded Finance Act 2013 position Imposed an annual tax on high value residential properties owned by non natural persons Threshold set at 2m valuation at 1 April in a given year (at 2m, a 15k annual tax charge) Higher the value, higher the tax Exemption for charities Can claim a relief if a genuine property developer or property rental business New Budget 2014 rules Reduces the threshold to 500k ( 3.5k annual tax charge, moving to 7k if property worth 1m) 32
Indirect Tax Changes to the VAT treatment of prompt payment discounts Currently: VAT due on discounted price offered for prompt payment even when discount not taken up Change: VAT accounted for on consideration actually received from 1 May 2014 (telecommunications and broadcasting services) and otherwise 1 April 2015 VAT registration and deregistration thresholds with effect from 1 April 2014 The registration threshold is increased from 79,000 to 81,000 The deregistration is increased from 77,000 to 79,000 The registration and deregistration threshold for acquisitions from other EU Member States is increased from 79,000 to 81,000 33
Indirect Tax Relevant residential purpose HMRC released an information sheet earlier this year to confirm that where a building meets both the requirements of an RRP building and a dwelling then it can be treated as either and the taxpayer can choose to change the treatment. RRPs include homes and institutions providing residential accommodation and care to people in need or student accommodation. The advantage of RRP status is that the entire build can qualify for zero rating even if part of it isn't used for a qualifying purpose. However, the zero rating may need to be revisited if the use changes within 10 years. 34
Budget 2014: Any Questions? 35