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The Budget - 20 March 2013

Earlier budgets

Delivered by George Osborne on 20 March 2012, this was the fourth budget of the Conservative / Liberal Democrat coalition government.  Some of the announcements do not come into effect immediately, many being delayed until April 2014 just one year before the next General Election.

This report covers the main taxes and their effect on most people.  It is not intended to be a complete definitive guide to the budget.  All figures are approximate.  If you are looking for a definitive guide then you should try one of the 'Big Four' accountancy firms' websites, or the Financial Times. Alternatively you could try the official budget pages at HM Treasury.

The summary below includes announcements from the budget, but also includes changes announced in earlier budgets and the 2012 autumn statement as these affect the tax system for 2013-14.

Income Tax

National Insurance

Savings

Corporation Tax

Capital Allowances

Capital Gains Tax

Inheritance Tax

Property taxes

VAT

Child Benefit

Housing Market



Income Tax


The following income tax changes have been announced:


National Insurance


National insurance remains unchanged for the individual, but employers will receive a £2,000 per annum reduction in the amount they have to pay from April 2014.  An HMRC spokesman has since said "The Employment Allowance will be aimed at all businesses and charities. They have to be a business, so a family employing a nanny will be exempt from it."


Savings


The annual limit on investing in ISAs (Individual Savings Accounts) is now adjusted annually in line with the Retail Prices Index (RPI) so no announcement was needed in the budget.  However, the limits for cash ISAs for 2013-14 increases from £5,6,40 to £5,760 for 2013-14.  No tax is payable on interest earned in these accounts as long as the rules associated with the account are followed.  The amounts for non Cash ISAs are double these figures.


Corporation Tax


Having announced a series of changes to the main rate of Corporation Tax (paid by companies with profits exceeding £1.5m) in the last two budgets, George Osborne amended these.  From April 2013 the rate will fall from 24% to 23%.  In April 2014 it will fall again to 21% and then to 20% in April 2015 at which point it will be the same for all companies regardless of size.

The Corporation Tax rate for small companies (those with profits below £300,000) reduced to 20% in April 2011 and this is not expected to change in the near future.

Companies with profits between £300,000 and £1.5m will continue to pay corporation tax at a rate between the main rate and the small companies rate.


Capital Allowances


There were no significant announcements in the budget on Capital Allowances.  

The Annual Investment Allowance for the purchase of certain capital items reduced from £100,000 to £25,000 in April 2012.  This was increased to £250,000 for January 2013 to December 2014 as a temporary measure in the 2012 autumn statement.

The writing down allowance on assets where the Annual Investment Allowance cannot be claimed, reduced to 18% (from 20%) in April 2012.


Capital Gains Tax


The Capital Gains Tax rate for gains made by higher rate taxpayers on non business assets was increased from 18% to 28% from 23 June 2010 by the June 2010 budget.  This rate remains in force.

Entrepreneurs' relief remains unchanged so that the first £10 million of certain types of Capital Gain is taxed at a reduced rate of 10%.  (This was increased from £1m to £2m in the March 2010 budget, to £5m in the June 2010 budget, and to £10m in the 2011 budget).

Capital Gains on business assets not covered by entrepreneurs' relief, and gains made by individuals not paying higher rate tax will continue to be taxed at 18%.

The Annual Exempt Amount of £10,600 was increased to £10,900 and this will increase by 1% in April 2014 and by a further 1% in April 2015.


Inheritance Tax


The Inheritance Tax Threshold, the value of an estate after which inheritance tax is paid, will remain at £325,000 until 2019.  This was announced in the 2012 autumn statement.


Property Taxes


Stamp Duty Land Tax was increased from 5% to 7% on the purchase of property exceeding £2m, effective from 22 March 2012.  

In a move designed to stop people avoiding stamp duty by purchasing property through a company, such purchases are now subject to a stamp duty land tax rate of 15%.

From April 2013 a Residential Property Tax will be payable by companies on real estate held in a corporate structure.  The annual levy is based on the property value and varies from £15,000 for properties valued at £2m, and increased to £140,000 where the property is valued at £20.


VAT


There was no change to VAT rates.

The registration threshold (if your annual turnover exceeds this you have to register) rises to £79,000.


Child Benefit


The reduction in child benefit for households where there is one or more people earning over £50,000 came into effect in January 2013 having been announced in the 2011 budget and amended in the 2012 budget. 1% of the child benefit will be withdrawn for every £100 the highest earner in the family's income exceeds £50,000, so that no child benefit is paid if income exceeds £60,000.


Housing Market


The Chancellor announced two measures in an attempt to stimulate the housing market and house contruction industry.  



Summary

Businesses will undoubtedly welcome the £2,000 reduction in their national insurance bill (from April 2014).  The stimulus to the housing market could be inflationary, although after several years of stagnation some modest inflation may be no bad thing.  We suspect these are the two measures that will be most remembered, certainly far more than the 1p reduction in the price of a pint of beer.  You would have to have a serious alcohol problem to gain much from that!

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