Tax rates for small business owners – 2014/15

With the plethora of tax rates, thresholds and allowances changing every year, here is ByteStart’s summary of the main tax rates, tax bands, and allowances for the 2014/2015 tax year. We focus on the figures that are of relevance to business owners.

If you are using these figures to help complete your tax return, you might also want to have a look at; 10 Common Self-Assessment Tax Return mistakes and how to avoid them.

If you are looking for the figures for other tax years, you can find them here;

Income Tax Allowances for 2014/15

  • For the tax year 2014/15, the annual personal allowance rises to £10,000 from £9,440.
  • The annual personal allowance for people born between 6 April 1938 and 5 April 1948 is £10,500
  • The annual personal allowance for people born before 6 April 1938 is £10,660.
  • If you earn over £100,000 or more, the value of this allowance decreases by £1 for every £2 you earn over £100,000. This creates an effective marginal rate of tax of over 60% for income between £100,000 and £120,000.

Income Tax Bands and Thresholds for 2014/15

  • To pay for the increased personal allowance, the higher rate income tax threshold for 2014/15 is cut from £32,010 to £31,865. Below this threshold, the basic 20% income tax rate applies.
  • Between £31,866 and £150,000, the higher 40% income tax rate applies.
  • The ‘additional’ 45% rate applies to all income above £150,000 during the 2014/15 tax year.

Dividend Tax Rates for 2014/15

  • The tax bands for dividend income are the same as those used for income tax (see above).
  • As Corporation Tax has already been paid on company profits paid out as dividends, all shareholders receive a 10% dividend voucher with their dividends.
  • As a result, there is no tax to pay on dividend income falling within the basic rate tax threshold of £31,865 for 2014/15.
  • Dividend income falling into the higher rate tax band is taxed at 32.5%. After allowing for the 10% tax credit, the effective tax rate is 25%.
  • Dividend income above the higher rate tax limit of £150,000 is taxed at 37.5% from April 2014 – an effective tax rate of 30.55%).
  • For more detailed information and the calculations you need to make to work out the tax you need to pay on your company dividends, read How company dividends are taxed.

Paying less tax

To explore ways that could help you to pay less tax, read these ByteStart guides;

Business Taxes for 2014/15

  • The small profits rate stays at 20%. This rate is payable on all limited company profits up to £300,000 per year.
  • As the Government previously set out, the main rate of Corporation Tax is cut further. From 1st April 2014, the rate falls to 21%. From April 2015, the main corporation tax rate and the small profits rate will be aligned at 20%.
  • The main rate applies to annual profits of more than £1.5 million. Marginal relief applies to companies who declare annual profits between the two thresholds.

Value Added Tax (VAT) for 2014/15

  • From April 1 2015, the compulsory VAT registration threshold increases to £82,000 from £81,000.
  • The VAT de-registration threshold rises to £80,000 from £79,000.

National Insurance Contributions (NICs) for 2014/15

  • If you are an employer, the Employers’ NIC rate is 13.8% on weekly earnings of £153 or more.
  • Employees’ NICs are payable at 12% on income between £153 and £805 per week, and 2% on income of £805 and more per week.
  • The self-employed pay Class 2 NICs at the rate of £2.75 per week. You are exempt from making Class 2 National Insurance payments if you earn less than £5,885 per year.
  • The self-employed also pay Class 4 NICs at 9% on annual profits between £7,956 and £41,865, and 2% on profits above £41,865.

Business Rates

  • The standard multiplier to businesses based in England is 48.2p for the 2014/15 tax year.
  • The ‘small business’ multiplier for England is 47.1p. This rate applies to rateable values of up to £18,000 (£25,500 in Greater London)

Corporate Allowances and Reliefs for 2014/15

  • The Annual Investment Allowance is doubled from £250,000 to £500,000. The increased allowance will run from April 2014 to December 2015.
  • The Plant & Machinery rate is 18%, and the special rate remains at 8%.

Other Personal Taxes, Thresholds & Allowances for 2014/15

  • The Inheritance Tax (IHT) threshold stays at £325,000. Estates are taxed at 40% above this point.
  • The Individual Savings Account (ISA) limit is increased to £11,880, half of which can be held as cash.
  • New Individual Savings Accounts (NISAs) will be launched on July 1. At this time, the annual allowance will be increased to £15,000.
  • The annual Capital Gains Tax (CGT) allowance increases by £100 to £11,000.
  • CGT is charged at 18% for basic rate taxpayers, and 28% for higher rate taxpayers.
  • As announced in the 2013 Budget, from April 2014 the annual tax-free pensions contribution limit is cut to £40,000 from £50,000 and the lifetime allowance falls to £1.25m from £1.5m.

More tax help on ByteStart

For more information and guidance to help you deal with the thorny subjects of tax and accounting, try some of our popular guides for small businesses;

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