The key announcements in the 2012 Budget are as follows:
PERSONAL TAXATION
Income Tax
From 6 April 2013, the personal allowance for those under 65 will be increased by £1,100 to £9,205. The basic rate limit threshold will also be reduced to £32,245. The personal allowance and basic rate limit will be £41,450.
For 2013-14, the main rates of income tax will be the 20% basic rate, the 40% higher rate and the additional rate which will be reduced from 50% in 2012-13 to 45%.
From 2013-14, the age-related personal allowances will not be increased and their availability will be restricted to people born on or before:
- 5 April 1948 for the allowance worth £10,500; and
- 5 April 1938 for the allowance worth £10,660.
People born on or after 6 April 1948 will be entitled to the personal allowance of £9,205 for 2013-14.
For reference, from 6 April 2012, the personal allowance for those under 65 will be increased by £630 to £8,105 and the basic rate limit will be reduced to £34,370 making the level at which higher rate tax is payable £42,475 the same as for 2011/12.
Legislation will be introduced in Finance Bill 2013 to apply a cap on income tax reliefs claimed by individuals from 6 April 2013. The cap will apply only to reliefs which are currently unlimited. For anyone seeking to claim more than £50,000 in reliefs, a cap will be set at 25% of income (or £50,000, whichever is greater) Draft legislation will be published for consultation later this year.
Child Benefit income tax charge
Legislation will be introduced in Finance Bill 2012 that imposes a new charge on a taxpayer who has adjusted net income over £50,000 in a tax year, where either they, or their partner, is in receipt of Child Benefit for the year. This will have effect from 7 January 2013. If both partners have adjusted net income over £50,000, the partner with the higher income is liable for the charge.
The income tax charge will apply at a rate of 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid.
Child Benefit claimants will be able to decide not to receive Child Benefit if they or their partner do not wish to pay the new charge.
For the tax year 2012-13, the first year of the charge, the amount of income taken into account will be the full amount of income for 2012-13 and the amount of Child Benefit will be that paid in the period from 7 January 2013 to the end of the tax year. For subsequent years, the full amount of Child Benefit and the income for the year will be taken into account.
Future reduction in National Insurance Contributions limits
From April 2013, the Class 1 Upper Earnings Limit and the Class 4 Upper Profits Limit for National Insurance contributions will be aligned with the point at which the higher rate tax becomes payable (£41,450).
Company Car Tax rates 2014/15 and onwards
Legislation will be introduced in Finance Bill 2012 to increase the appropriate percentage for company cars emitting more than 75g of carbon dioxide per kilometre by one percentage point to a maximum of 35 per cent in 2014-15.
In both 2015-16 and 2016-17, the appropriate percentages of the list price subject to tax will increase by two percentage points, to a maximum of 37 per cent.
From April 2016, the Government will remove the three percentage point diesel supplement so that diesel cars will be subject to the same level of tax as petrol cars.
From April 2015, the five year exemption for zero carbon cars and the lower rate for ultra low emission cars will come to an end as legislated in Finance Act 2009.
The appropriate percentage for zero emission and all low carbon cars emitting less than 95g of carbon dioxide per kilometre will be 13 per cent in 2015-16, and will increase by two percentage points in 2016-17.
Company Car Fuel Benefit Charge 2012/13
Employees and directors who are provided with a company car and who also receive free fuel from their employers are subject to the fuel benefit charge. The cash equivalent of the taxable benefit is determined by multiplying a set figure (currently £18,800) by the appropriate percentage for the car, based on its CO2 emissions (grams per kilometre). This will be increased to £20,200 with effect from 6 April 2012. The multiplier will increase by two per cent above the rate of inflation (based on RPI) in 2013-14.
Van Fuel Benefit Charge 2012/13
The van fuel benefit charge multiplier will be frozen at £550, and will increase by inflation in 2013-14.
Employer Asset-backed Pension Contributions
On 29 November 2011 and 22 February 2012, the Government announced that legislation, effective from the respective dates of the announcement, would be included in Finance Bill 2012 to remove any unintended, excessive tax relief arising from asset-backed contributions.
The Government published on 29 March, as part of the draft Finance Bill 2012, related changes to the structured finance legislation and anti-avoidance provisions to recover relief when employers cease to be chargeable to tax or when a person will be placed in a more advantageous tax position as a result of the application of the revenue protection rules published in February. These changes will be effective from 21 March 2012. Relieving or clarifying changes to the February legislation, effective from 22 February, will also be introduced under the Finance Bill 2012.
Qualifying Recognised Overseas Pensions Schemes (QROPS)
The rules on transferring pension funds from a UK registered pension scheme to an overseas pension scheme are changing from 6 April 2012.
There are new conditions that a pension scheme must meet to be a Qualifying Recognised Overseas Pension Scheme (QROPS). There are also new information and reporting requirements and shorter reporting time limits. These changes will affect:
- an individual transferring their pension savings
- a UK registered pension scheme making a transfer to a QROPS
- a QROPS that receives or has received a transfer from a UK scheme.
CAPITAL TAXATION
Capital Gains Tax Annual Exempt Amount
The annual exempt amount for capital gains tax remains £10,600 for 2012-13.
As previously announced in the 2011 Budget, legislation will be introduced in Finance Bill 2012 to uprate the CGT annual exempt amount in line with rises in the CPI instead of the retail prices index. The first year to be affected will be 2012/13. Parliament will still be entitled to override automatic indexation and set a different figure.
Stamp duty land tax (SDLT): rate in respect of residential property where consideration over £2 million
Legislation will be introduced in Finance Bill 2012 to charge SDLT at 7 per cent of the chargeable consideration where this is more than £2 million. The measure takes effect for transactions where the effective date (normally the date of completion) is on or after 22 March 2012.
Stamp duty land tax: enveloping of high value residential properties
The government will introduce legislation in Finance Bill 2012 to apply a 15 per cent rate of SDLT to residential properties over £2 million purchased by certain non-natural persons. This will take effect from 21 March 2012. In addition, the government will introduce paving legislation for an annual charge.
Inheritance tax allowance
There have been no changes to the inheritance tax nil rate band, being £325,000, and it will continue to be frozen until April 2015. The Government previously announced that from 2015-16 the consumer prices index will be used as the default indexation assumption.
The Government has also previously announced in the 2011 Budget that a reduced rate of inheritance tax (IHT) will apply where 10 per cent or more of a deceased’s net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity. In those cases the current 40 per cent rate will be reduced to 36 per cent. The new rate will apply where death occurs on or after 6 April 2012. The Government will be consulting on the detailed implementation of this measure and will issue a consultation document before the summer.
BUSINESS TAXATION
Corporation tax
The corporation tax rates for the financial year commencing 1 April 2012 will be reduced to the following rates:
| Profits | Rate | |
| Main rate | In excess of £1,500,000 | 24% |
| Small Profits rate | Below £300,000 | 20% |
An extra 1% reduction was made to the main rate of corporation tax that was previously stated.
A marginal rate will be effective between these limits.
The main rate will be further reduced by 1% each year until 2014/15, when it will be 22%.
Tax simplification for small businesses
Following the Office of Tax Simplification review of small business taxation, the government will consult on introducing a voluntary cash basis for unincorporated businesses up to the VAT registration threshold, with a view to introducing legislation in Finance Bill 2013. It will also consult on a simplified expenses system for business use of cars, motorcycles and home. Finally, the government will also consult on proposals to introduce a disincorporation relief. The consultation will look at the potential demand for such a relief as well as the practicalities of how it would work.
Seed Enterprise Investment Scheme (SEIS)
As announced in the Autumn Statement 2011, legislation will be included in Finance Bill 2012 to introduce a new Seed Enterprise Investment Scheme. Following consultation, changes have been made to the legislation to allow companies:
- to qualify if they have subsidiaries
- to determine eligibility by reference to the age of any trade rather than to the age of the company
- to remove reference to the holdings of other entities in calculating asset and employee tests
- to allow previous (but not current) employees to qualify
- to allow directors who have qualified under SEIS to continue to qualify under EIS, subject to time limits.
Patent box
Legislation will be introduced in Finance Bill 2012 to allow companies to elect to apply a 10 per cent Corporation Tax rate to a proportion of profits attributable to patent and certain other qualifying intellectual property from 1 April 2013. In the first year this proportion will be 60 per cent and increase annually to 100 per cent from April 2017.
Corporation Tax relief’s for the creative sector
The government will introduce Corporation Tax relief’s for the production of culturally British video games, television animation programmes and high-end television productions. Consultation on the design will take place over the summer. Legislation will be in Finance Bill 2013 and will take effect from 1 April 2013, subject to State aid approval.
VAT
Registration and deregistration limits
From 1 April 2012, the taxable turnover threshold which determines whether a person/entity must be registered for VAT will increase to £77,000 (currently £73,000). The de-registration threshold will increase to £75,000 (currently £71,000).
The registration and deregistration threshold for relevant acquisitions from other
EU Member States will also be increased to £77,000 (currently £73,000).
Fuel Scale charges
Fuel scale charges will be revised effective from 1 May 2012. These will be published on our news feed.
Addressing Borderline Anomalies
The government has announced changes to address some anomalous VAT borderlines. The changes either marginally extend VAT at the standard rate to these areas or confirm the current standard rated treatment.
This consultation invites comments on draft legislation changing the VAT treatment of supplies of catering, sports drinks, self storage, hairdressers' chair rental, holiday caravans and alterations to listed buildings.
HMRC would like to hear from businesses involved in the manufacture and retail of affected goods or the provision of affected services; consumers affected by the changes and tax practitioners.
CHARITABLE GIVING
Gift Aid for Charitable Companies and Community Amateur Sports Clubs
From 6 April 2012 charitable companies and Community Amateur Sports Clubs (CASCs) will be able to make claims for repayment of Gift Aid outside a tax return.
Also, CASCs will be able to reclaim tax under gift aid retrospectively from 1 April 2010 in relation to gift aid and 6 April 2010 in relation to claims.
EXCISE DUTY
From 6pm on Wednesday 21 March 2012 the following changes will take effect:
- Tobacco duty – 5% above the rate of inflation (hand rolling tobacco – additional 10%)
The following increases are effective from 26 March 2012:
- Alcohol duty – 2% above inflation
A document containing the tax rates applying for 2012-13 will be available for download from our website downloads page in due course.
Printed tax tables are also being produced and if you would like to receive a copy then please contact us.
Please contact us at Edwin Smith if you would like to discuss any of the measures announced in the 2012 Budget in more detail or to apply any changes to your specific circumstances.
This article 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 web page.
