On Wednesday 5 December 2012, the Government delivered its Autumn Statement. The Chancellor announced this year he was seeking to offer ‘new support for business and enterprise’. We have detailed below the main tax measures introduced. We have also provided commentary on the changes announced.
Business Tax
• The main corporation tax rate for 2014 will be reduced by a further 1% to 21%.
• As already announced, the main corporation tax rate for 2013 is 23% and the Small Profit rate is 20%.
• The Annual Investment Allowance will be increased from £25,000 to £250,000 per annum for a 2 year period commencing from 1 January 2013.
• A simpler income tax scheme for small unincorporated businesses will be introduced for the tax year 2013-14.
Personal Tax
• For the tax year 2013-14 the Personal Allowance will increase to £9,440 and the basic rate limit will be set at £32,010.
• For 2014-15 and 2015-16 the increase in the higher rate threshold will be capped at 1%.
• Child Benefit rates are frozen in 2013-14 and will increase by 1% in 2014-15 and 2015-16.
• For 2013-14, there are no changes to the percentage rate of contribution for Class 1 and Class 4 National Insurance contributions (NICs) but there are changes to all of the thresholds and limits.
Pensions
• The annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000.
• The standard lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million.
• A transitional ‘fixed protection’ regime will be introduced for those who believe they may be affected by the reduction in the lifetime allowance.
Other
• The IHT nil-rate band was frozen at Budget 2010 at its current level of £325,000 until April 2015. For 2015-16 the band will be increased by 1% rounded up to £329,000.
• The 3.02 pence per litre fuel duty increase that was due to take effect on 1 January 2013 will be cancelled and the increase that was planned for 1 April 2013 will be deferred until 1 September 2013.
The Autumn Statement delivered some helpful news on the whole for businesses, especially SMEs. The reduction in corporation tax to 21% from 2014 and the two year increase in the Annual Investment Allowance will be especially welcomed. Creative Industries will value the 25% tax credit introduced in their sector. The Government’s decision not to proceed with the proposed IR35 changes or the upcoming 3 pence per litre increase in fuel duty will also be welcomed. In relation to employees, the Government confirmed it will introduce from April 2013 new employee share ownership rules whereby employees can be given shares up to £50,000 free from capital gains tax.
Less welcome measures include the changes introduced to pensions tax relief, to reduce both the annual contribution cap and the lifetime fund cap. The introduction of the General Anti-Abuse Rule (GAAR) next year should target tax avoidance schemes and hopefully not impact legitimate tax planning. Draft legislation will be published shortly on the GAAR.
There was a number of measures which have been under consultation not addressed in the Autumn Statement, for example the income tax reliefs cap and statutory residence rules. Draft Finance Bill clauses will be issued on 11 December 2012, which should cover the detail of such measures.
We look forward to providing further commentary once the detailed clauses have been published. In the meantime, if you would like to discuss any of the measures please contact us or call your local Burgis & Bullock office on 0845 177 5500.