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 1^st 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 1^st 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 6^th 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 1^st 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.