Welcome to the February 2014 Newsletter from Connolly Accountants Ltd

With the Chancellor’s annual Budget on the horizon, this first quarter has already seen an abundance of propositions and conjecture on Government policy for the coming year and beyond.

Despite some querulous voices from the Opposition, Chancellor George Osborne has demonstrated confidence in the state of the economy and the future of the UK in the aftermath of recession. The International Monetary Fund (IMF) has also announced a more optimistic UK growth forecast of 2.4%, amid predicted global economic growth of 3.7%.

However, despite the suggestion of a momentary breathing space for the economy, plans to reform the National Minimum Wage – including an above inflation increase – have been greeted with less enthusiasm by some business groups.

More welcome amongst some campaigners was the announcement that Child Trust Funds can be transferred to Junior ISAs from next year, in a move which is set to benefit more than six million young savers.


Business reacts to minimum wage plans

Following an announcement of tougher penalties for employers found to be flouting the National Minimum Wage (NMW), the same week also saw proposals for an increase in the rate itself.

First, Business Secretary Vince Cable set out plans to quadruple fines for employers who fail to pay the current NMW of £6.31 per hour for workers aged 21 and over. It was confirmed that the maximum fine of £5,000 will rise to £20,000 this February, while the financial penalty will also increase from 50% to 100% of the missing wages.

Mr Cable said, ‘Anyone entitled to the national minimum wage should receive it. Paying anything less than this is unacceptable, illegal and will be punished by law. So we are bringing in tougher financial penalties to crack down on those who do not play by the rules. The message is clear - if you break the law, you will face action'.

Shortly after this news, Chancellor George Osborne presented his proposal to dramatically increase the NMW, which is set by the independent Low Pay Commission. This would mark the first time since 2008 the rate has increased in any significant way with respect to inflation. Mr Osborne’s proposal is a 10% rise, which in real terms means moving up from £6.31 to £7 per hour by 2015, at the current 2% rate of inflation.

Frances O’Grady, General Secretary of the Trades Union Congress (TUC), welcomed both proposals, commenting, ‘The TUC has long argued that successive governments have been soft on minimum wage dodgers’.

O’Grady added, ‘We welcome George Osborne’s acceptance of the TUC’s case for an above inflation rise in the minimum wage. But while this would help many, the Chancellor should be more ambitious about achieving decent pay rises across the whole of the UK workforce’.

However, the Director General of the Confederation of British Industry (CBI), John Cridland, warned, ‘An unaffordable rise would end up costing jobs and hit smaller businesses in particular. Any increase in wages must reflect improved productivity’.

The Government may be hoping that these changes, coupled with the forthcoming reforms to national insurance, will put them in good stead for the 2015 election campaign.


Treasury to lift ban on Child Trust Fund transfers

Following criticism by some industry experts over the lack of action on Child Trust Funds (CTFs) in the 2013 Autumn Statement, the Government has now announced that parents will be able to transfer money held in CTFs into more favourable Junior Individual Savings Accounts (JISAs). In a major change to the existing rules, Chancellor George Osborne has revealed that the current ban on such transfers will be lifted from April 2015.

CTFs were introduced by the previous Labour Government and were available to children born between 1 September 2002 and 31 December 2010 inclusive. From that point they were replaced by the JISA – but the two types of account are currently treated separately, meaning those with a CTF are unable to open or move money into a JISA.

An estimated £5 billion is currently held in CTFs, with interest rates often as low as half those available for JISAs. From 6 April 2014, subscription limits for both types of account will rise to £3,840, in line with the consumer price index (CPI) measure of inflation.

The move will no doubt come as welcome news to parents, with over six million young savers set to benefit from greater choice and more generous savings rates when the new ruling comes into effect next year.

Founder of MoneyComms, Andrew Hagger, advised: ‘Parents should continue contributing to their CTF for now, but as soon as they are able they should consider switching to a JISA where it’s possible to secure a better return’.

Another advantage is that when the child turns 18 the JISA will automatically upgrade to an adult ISA so those savings can continue into their adult life.

We can help to ensure that your personal finances are as tax-efficient as possible – please contact us for advice.


ESSENTIAL TAX DATES FOR FEBRUARY

1 February
£100 penalty if 2013 Tax Return not yet filed online. Additional penalties may apply for further delay. Interest starts to accrue on 2012/13 tax not yet paid.

2 February
Submission date of P46 (Car) for quarter to 5 January.

14 February
Last date (for practical purposes) to request NIC deferment for 2013/14.


QUOTE OF THE MONTH

"My great hope is that 2014 will prove momentous."

Managing Director of the IMF, Christine Lagarde, commenting on optimistic new expectations of UK growth.


WEBSITE OF THE MONTH

www.juniorisas.org

Advice and information on choosing and setting up the right Junior Individual Savings Account for your child.


ON OUR WEBSITE

Tax Strategies
For advice on effective business planning, visit the Tax Strategies section of our website.

Savings and Investments
For essential tips and information on making the most of your finances, visit the Your Money section of our website.

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