simpson wood budget summary 2012

Budget 2012

This presentation is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining

from taking any action on the basis of the contents of this presentation. This presentation represents our understanding of law and HM Revenue & Customs practice as

at 21 March 2012.

21 March 2012

www.simpson-wood.co.uk

Budget themes• Austerity to continue• Borrowing in 2011/12 expected to be £1bn below

previous forecast – still over £125bn• 2012 economic growth 0.8% – 0.1% up on earlier

forecast• Steady as she goes:

Draft Finance Bill 2012 clauses published last December.

Most tax and benefits changes announced alongside Autumn Statement.

No scope for giveaways.

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Personal tax allowances• Main allowance rises by £630 to £8,105 in

2012/13 Benefit clawed back from higher rate taxpayers

through smaller basic rate band. Other allowances generally rise by 5.6%.

• Main allowance rises by £1,100 to £9,205 in 2013/14

But basic rate band shrinks to £32,245. So higher rate taxpayers only receive a quarter of

basic rate tax payer’s benefit from allowance increase.

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Personal tax allowances• Personal allowance phased out above £100,000

No indexation of limit. Allowance reduced by £1 for each £2 of excess. No personal allowance above:

- £116,210 income in 2012/13- £118,410 income in 2013/14

Effective marginal tax rate 60% in band above £100,000 until allowance lost completely.

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Personal – income tax rates• Starting rate of tax 10% up to £2,710

Not available if non-savings taxable income >£2,710

• Basic rate up to £34,370 – a drop of £630 20% generally, but 10% for dividends Another £2,125 drop to £32,245 in 2013/14

• Higher rate up to £150,000 40% generally, but 32.5% on dividends

• ‘Additional rate’ over £150,000 – no indexation 50% generally, but 42.5% on dividends Cut to 45% (37.5% dividends) from 2013/14

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Child benefit• Original plan

£20.30 pw and £13.40 pw Lost if 1p of higher rate tax paid Based on individual not joint income ‘Bizarre and economically damaging set of

incentives’ – IFS• New plan

From 7/1/13, all benefit is lost if income £60,000 or more

Phased out from £50,000 income as tax charge 1% child benefit charge per £100 of income over

£50,000 Effective 57.52% overall ‘tax’ rate for two-child

family Joint income issue ignored Inter-spouse transfer or withdrawn claim? Pension contribution




Tax credits• Child tax credit

Family element worth up to £545 Currently phased out at £40,000 of (joint) income For 2013/14, phasing generally starts much earlier:

- Typically lost for income > £26,000 for one child- Typically lost for income > £32,200 for two

children• Other tax credit changes

50+ element will end Backdating cut to one month First £2,500 of income fall ignored for in-year

increases 24hrs, not 16hrs work, for couples’ working tax

credit




Personal tax – ISAs• Higher limits• 2012/13 maximum investment £11,280• 2012/13 cash element £5,640• Junior ISA launched November 2011

£3,600 limit – cash or stocks & shares No change for 2012/13

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Life policies• An effective £3,600 cap on total premiums

payable to qualifying life policies from April 2013 Higher contributions will mean benefits are

potentially taxable Transitional reliefs promised

• New rules to prevent avoidance through: Shifting gains between policyholders Interdependent clustered policies




Personal tax – VCT and EIS• EIS

Income tax relief limit doubles to £1,000,000 each tax year

• VCT and EIS investment companies – April 2012 Up to 249 employees Gross assets up to £15 million Investment up to £10 million New ‘disqualifying investment’ rules No feed-in-tariffs or share acquisitions

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Personal tax – Seed Enterprise Investment Scheme (SEIS)• 50% income tax relief• CGT reinvestment exemption – 2012/13 only• Maximum total investment £100,000 per tax year• Very small, new companies:

No more than two years old Conduct genuine new business Fewer than 25 employees Gross assets no more than £200,000 £150,000 maximum total capital raised

• Due diligence and monitoring costs?

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Personal tax reliefs• New limit on income tax reliefs from 2013/14• Applies only to uncapped reliefs, e.g. qualifying

interest• If more than £50,000 of relief claimed, relief

limited to greater of 25% of income £50,000

• Government will consult to ensure this ‘will not impact significantly on charities that depend on large donations’




Cars and vans• Company car benefit April 2012

Reworking of CO2 bands 75g/km or less – 5% charge 76g/km -99g/km – 10% charge 100g/km and above: 11% + 1% for each 5g/km Further 1% increase in scale rates in 2013/14 Big jumps for some low emission vehicles

• Fuel benefit Basis figure for cars rises to £20,200, vans

unchanged

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National insurance contributions• Limits

Lower earnings limit rises to £107 a week for 2012/13

Primary (employee) threshold rises to £146 a week Secondary (employer) threshold rises to £144 a

week Upper earnings limit stays to £817 a week

• Rates Main rates unchanged

• Contracting out Only available for defined benefit schemes in

2012/13- Many (re)joining state second pension (S2P)

NIC rebates cut by 0.3% (employer) and 0.2% (employee)

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Pensions• Annual allowance left at £50,000 for 2012/13

Follows cut for 2011/12 from £255,000 to £50,000 Annual allowance charge matches tax relief given Three year ‘carry forward’ facility offers opportunity

to grab 50% relief on contributions up to £200,000 in 2012/13

• Lifetime allowance falls to £1.5m in 2012/13 Future allowance increases very unlikely in short

term ‘Fixed protection’ option must be claimed by 5 April

2012- Implies no further contributions after 5 April

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Capital taxes• CGT rate and annual exemptions 2012/13

Rates of tax 18% / 28% Individual £10,600 Trusts £5,300

• IHT Nil rate band stays frozen at £325,000 36% estate rate for 10% charitable gifts

• Stamp taxes £250,000 first buyer threshold ends 24 March 2012 7% SDLT on properties over £2m from 22 March

2012 Attack on SDLT avoidance via offshore companies

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Corporation tax• Main rate from April 2012: 24%

2% cut from 2011, when 1% was expected Falls to 22% in 2014

• Small profits rate from April 2012: 20% • Effective marginal rate from April 2012: 25%• Thresholds remain at 1994 levels

Up to £300,000 £300,000 – £1.5 million Over £1.5 million

• Bank levy increased so banks will not benefit overall

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Capital allowances, R&D reliefs• Annual investment allowance falls to £25,000

from April 2012 But all may not be lost

• Main plant and machinery (P&M) rate of writing down allowance fall to 18% in 2012

• Rate of R&D tax credit for SMEs rises to 225% from April 2012 £10,000 minimum expenditure requirement

removed• New ‘above the line’ R&D credit from April 2013

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VAT• VAT rates: no change• Turnover limits

Registration limit £77,000 Deregistration limit £75,000

• Fuel scale charges Revised upwards

• Low value consignment relief VAT-free imports from Channel Islands end after 31

March 2012• All returns and payments online from 1 April 2012

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Non-domiciles etc

• £50,000 annual charge for those with 12 or more years UK residence from 2012/13

• Exemption for remittances used for commercial investment in UK business (quoted or unquoted)

• Some minor simplification of the rules• No more changes in this Parliament• New statutory residence test delayed until 2013• ‘Ordinary residence’ concept to disappear in

2013




Tax simplification• 36 ‘outdated’ reliefs to be abolished

Some in Finance Bill 2012, some by regulations Tax reserve certificates Luncheon vouchers (from 2013/14) Life assurance premium relief from (2015/16) Black beer Angostura bitters



Budget 2012

This presentation is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining

from taking any action on the basis of the contents of this presentation. This presentation represents our understanding of law and HM Revenue & Customs practice as

at 21 March 2012.

21 March 2012

simpson wood budget summary 2012

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