Much tweaking to other tax allowances, duties, escalators etc was pretty much as expected. For home owners the Help to Buy scheme has had perhaps the most media coverage since this was unveiled in the Budget and it will be interesting to see whether this meets expectations.
What is without doubt is that this Government are committed to preventing Tax avoidance. Several new measures have been introduced and despite much consolidation and cut backs within H M Revenue and Customs we should expect a far tougher stance being taken by HMRC from now on.
An overview of some of the main tax changes are as follows:
The Personal Allowance increases from £8,105 to £9,440 on 6 April 2013 and will increase to £10,000 from 6 April 2014. However, the basic rate limit, being the amount of income that is chargeable to tax at 20% reduces from £34,370 to £32,010 on 6 April 2013 and, more significantly, to £31,865 from 6 April 2014. Therefore, the level at which you start to pay tax at 40%, which is £42,475 for 2012/13, reduces to just £41,450 from 6 April 2013. This means an individual could see their tax increase from 20% to 40% on their income over £41,450 i.e. on £1,025 of income. For 2014/15 this level increases to £41,865.
The income level at which you will pay the additional top rate of tax remains at £150,000 but the rate will reduce from 50% to 45% from 6 April 2013.
Once again however, the stealth tax increase is that the higher the personal allowance the more you will pay tax at the punitive rate of 60% if you earn over £100,000. This is because the personal allowance is withdrawn at a rate of £1 for every £2 of income once you earn £100,000. Therefore for 2013/14 a person earning say £130,000 will pay tax at an effective rate of 60% on earnings between £100,000 and £118,880. For 2014/15 when the Personal Allowance is £10,000 the band will apply up to £120,000.
The rates of Co2 emissions in respect of company cars reduce each year and there is also an increase in the car fuel multiplier from £20,200 to £21,100 which takes effect from 6 April 2013. The van benefit rate is frozen at £3,000.
Of note, a Statutory Residence Test will come into force from 6 April 2013 and this could affect foreign nationals visiting the UK and UK nationals who work or live overseas and much care is needed if you are currently regarded as a non resident for UK tax purposes.
The full rate of corporation tax is being reduced from 23% to 21% for the 2014 tax year i.e. 1 April 2014 to 31 March 2015 and a further 1% reduction to 20% for 2015 tax year.
Therefore until 2015, the small company rate remains at 20% so for limited companies with taxable profits below £300,000 there is no reduction. A marginal rate also remains for profits between £300,000 and £1.5m.
There are continued credit increases in respect of qualifying research and development expenditure and extensions to the capital allowances regime, which could be of help to relevant businesses.
The VAT threshold increases from £77,000 to £79,000 on 1 April 2013 and the de-registration limit from £75,000 to £77,000. With the VAT rate kept at 20% this could release many small traders from the requirement to be VAT registered.
The Government have now finalised the Simpler Income Tax for Small Businesses Scheme from 2013.
All businesses with income below the VAT threshold will be eligible to use this scheme. Whilst it may simplify a business owners record keeping and tax return completion there are other matters that should not be overlooked e.g. the transitional rules if a business is no longer eligible for the Scheme.
There are planning opportunities from this budget, especially for owner-managed businesses and for non resident individuals. The budget was very much about stimulating growth, whilst continuing to clamp down on anti-avoidance. Once again however the squeeze appears to be the middle income.
Given the current economic climate it is essential that businesses have a thorough understanding of their accounting and tax obligations and consider a commercial and relevant strategy for the future.
If you would like to discuss your tax affairs please get in touch, or if you would like to receive a Macario Lewin 2013/14 Tax Tables booklet please request this via our contacts page on www.macariolewin.com .
Martin Macario is director of Macario Lewin Ltd. The views expressed are his own.