Budget 2012
This is a brief overview of the Budget 2012, concentrating on the points that affect small business owners.
Corporation Tax
The published reduction in corporation tax will not affect companies with profits below £300,000 per year. The rate for small companies will not change from 20%.
From April 2013 there will be a favourable 10% rate of corporation tax on profits earned from patents and other intellectual property. Companies will need to keep clear records of relevant costs and income, separate from any other trading or income streams.
Research and Development Tax Relief
Changes will be made in the Finance Bill 2012, expected to receive royal assent in July 2012. Changes will apply from 1st April 2012, and are:
- the rate of relief will increase from 100% to 125%,
- a reduction in the rate of tax credit payable, from 12.5% to 11%, to keep the cash payment on claims the same in relation to the expenditure,
- the cap on payable tax credits at the amount of PAYE/NIC paid will be abolished,
- the requirement for a minimum spend of £10,000 will also be abolished.
Tax simplification
There are proposals to simplify accounting requirements for small unincorporated businesses, and to simplify expenses for all small businesses. The changes have not yet been confirmed, as they are still in consultation, but they will apply to businesses below the VAT threshold.
Business Rate Relief
The current small business rate relief holiday will be extended for 6 months from 1st October 2012. The government will also give businesses the opportunity to defer 60 per cent of the increase in their 2012-13 business rate bills as a result of the RPI uprating, to be repaid equally across the following two years.
Personal Tax
Changes to personal tax allowances were announced, as well as the phasing out of the age related allowance.
|
2011/2012 |
2012/2013 |
2013/2014 |
|
| Personal allowance |
7,475 |
8,105 |
9,205 |
| Age related allowance 65-74 |
9,940 |
10,500 |
10,500 |
| Age related allowance 75 + |
10,090 |
10,660 |
10,660 |
| Income limit for personal allowance |
100,000 |
100,000 |
100,000 |
| Income limit for age-related allowances |
24,000 |
25,400 |
25,400 |
| Basic rate band (20%) |
35,000 |
34,370 |
32,245 |
| Higher rate band (40%) |
150,000 |
150,000 |
150,000 |
| Additional rate |
50% |
50% |
50% |
| Dividend additional rate |
42.5% |
42.5% |
37.5% |
National Insurance
The following rates and limits for class 1 NIC will apply from 6th April 2012
| Weekly rates |
2012/2013 |
2013/2014 |
| Lower earnings limit |
£102 |
£107 |
| Primary threshold (employee) |
£139 |
£146 |
| Secondary threshold (employer) |
£136 |
£144 |
| Upper earnings limit |
£817 |
£817 |
| Primary main rate |
12% |
12% |
| Primary residual rate |
2% |
2% |
| Secondary rate |
13.8% |
13.8% |
| Class 1A rate on employment benefits |
13.8% |
13.8% |
For self-employed people the rates of NIC are increasing slightly
| 2011/2012 | 2012/2013 | |
| Class 2 weekly rate | £2.50 | £2.65 |
| Class 2 small earnings exception | £5,315 | £5,595 |
| Class 4 lower profits limit | £7,225 | £7,605 |
| Class 4 upper profits limit | £42,475 | £42,475 |
| Class 4 rate between lower and upper profits limits | 9% | 9% |
| Class 4 rate above upper profits limit | 2% | 2% |
Class 2 NIC is payable either monthly by direct debit, or twice yearly in July and January.
Class 4 NIC is calculated on taxable profits, and paid with your income tax.
VAT
With effect from 1st April 2012 the VAT registration threshold will be £77,000. The deregistration limit will be £75,000.
Further Information
More information can be found at www.hmrc.gov.uk, and on the Treasury website at www.hm-treasury.gov.uk. If you would like advice on how the changes may affect you please contact us.