Budget 2013

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The Budget 2013 introduced a new National Insurance for employers. The increase in personal allowance to £10,000 has been brought forward a year, to 2014. There will be very few changes to tax rates.

Employer’s NI (National Insurance) Contributions 

A completely new measure introduced in this budget is the employment allowance.  This will be a deduction in employer’s NIC of £2,000 per year for all businesses and charities from April 2014. It is intended that this will be easy to administer, and the Government will be consulting with stakeholders on the practical aspects. It should be easy to administer, and be done through the normal payroll and RTI (Real Time Information) reporting process.

Currently employer’s NI contributions reduce profit and business tax liability.  If all else is equal, employers will pay £400 more tax (at a rate of 20%). So the true saving for many employers will be £1,600.

Income Tax

The increase in the personal allowance to £10,000 is being introduced a year earlier than anticipated and will come in from April next year. When there is a rise in the personal allowance this usually means the Chancellor lowers the threshold for the higher rate of tax, so that it only benefits people on lower incomes. There have been no changes to income tax rates.

The basic personal allowance is available to people born on or after 6 April 1948. In the current year, 2012/13, it is £8,105; in 2013/14 (as previously announced) it will be £9,440. Once the personal allowance has reached £10,000 in 2014/15, it will then increase in line with inflation based on the Consumer Prices Index (CPI) in future years, starting from 2015/16.

VAT

The annual turnover threshold for VAT registration will go up from £77,000 to £79,000 from April 2013. The deregistration turnover limit will go up from £75,000 to £77,000.

Corporation Tax

The main rate of corporation tax is already scheduled to decrease to 23% from 1 April 2013. From April 2014 it will go down to 21%, and from April 2015 to 20%. There is no change to the rate for small companies, which remains at 20%.

Capital gains tax

The annual exempt amount in 2013/14 will be £10,900, increased from £10,600 in 2012/13. The exemption for most trustees will be £5,450.  There are no changes to capital gains tax (CGT) rates.

Small Company Shareholder/Directors’ Loans

The Government will close three loopholes to counter attempts to avoid the tax charge on loans from close companies to individuals with a share or interest in the company. The measures will have effect from 20 March 2013 and are expected to bring in just under £70m annually in the four years beginning 2014/15.

Later this year the Government will consult on the structure and operation of the tax charge on loans from close companies to their participators (shareholders). If legislation is needed it will be in the Finance Bill 2014.

The full Budget can be accessed at hm-treasury.gov.uk

If you would like any help with budget 2013 changes please contact us.

Budget 2012 Summary

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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.