On 21 March 2012 the Chancellor George Osborne presented his third Budget to the House of Commons.
The Chancellor said he is committed to creating a tax system that rewards hard work and supports families whilst cutting down on tax avoidance. He also set out the Government’s plans to support businesses by stimulating investment, exports, enterprise and the employment market.
Here are the main points:
The Personal Allowance will be increased by £1,100 to £9,205 from April 2013 (from April 2012 it will be £8,105).
There will also be a public consultation on merging the income tax and national insurance system, an idea proposed last year.
Taxpayers are also to be sent annual tax statements to let them know “what they’re paying and what they’re paying it for”.
For those earning £150,000 or more the 50% tax rate will be cut to 45% from April 2013.
There will be a cap on income tax relief of £50,000 or 25% of income, whichever is higher.
The nil rate band (the amount taxed at 0%) remains frozen at £325,000. Anything above this amount is taxed at 40%.
If at least 10% of an estate is left to charity on death, the rate of inheritance tax will be reduced to 36%. This applies to deaths after 6th April 2012.
ISAs. The overall investment limit will be £11,280 from April 2012. The maximum cash investment is £5,640.
Capital Gains Tax
The tax rate remains at 28% unless Entrepeneurs’ Relief is available, then it is only 10%.
The annual allowance has been frozen at £10,600.
Stamp Duty Land Tax
Stamp duty will increase from 5% to 7% on all homes worth £2million or more. However, stamp duty on homes costing more than £2million bought through a company will be 15%.
Child Benefit will be withdrawn from households where someone has an income over £50,000 a year. The withdrawal will be gradual for households where someone has an income between £50,000 and £60,000.
Annual Investment Allowance
Under plans that were announced two years ago, the Annual Investment Allowance will reduce from £100,000 to just £25,000 from April 2012. Disappointingly, the government did not reverse this decision.
There was a reduction in the main rate of corporation tax (applicable to companies with profits over £300,000 per annum) from 26% to 24% from April 2012. However, there was no reduction in the Small Companies Rate of Corporation Tax. Future cuts will see the rate drop to 23% in April 2013 and 22% in April 2014.
The VAT Registration threshold will increase from £73,000 to £77,000 from April 2012.
Legislation will be introduced in the Finance Bill 2012, to ensure the VAT treatment of various items is more consistent and to close a number of loopholes which in doing so has clarified a number of areas, including hairdressers’ chair rental.
Owners of smaller unincorporated businesses will be relieved from some of the burden of accounting for tax purposes with a new system of “cash accounting” for those whose turnover is less than £77,000 a year. This will be introduced following a formal consultation.
The National Loan Guarantee Scheme should help small businesses access lower interest rates, by guaranteeing up to £20bn worth of unsecured bank loans.
Many business benefit from the Small Business Rates Relief, which offers reduced business rates on premises with a rateable value of up to £17,999 (£24,499 in London). Despite increased pressure, the government did not reverse their decision to withdraw this Relief in March 2013.
London was announced as one of the new broadband super-connected cities along with Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, Manchester and Newcastle.
Sunday trading laws will be relaxed during the Olympics and Paralympics.
Karen Shakespeare, Consultant Solicitor
11 April 2012