eNEWS – March 2012
In this month’s enews we report on the Budget. You may have already read some information following Budget Day but we have included details of the key announcements.
Please contact us if you would like any further information.
Budget 2012
George Osborne presented his third Budget on Wednesday 21 March 2012.
The Chancellor started by reaffirming the need for stability in the UK economy and finished in Churchillian style with phrases such as:
‘No people will strive as the British will strive.’
‘No country will adapt as the British will adapt.’
‘This country borrowed its way into trouble. Now we’re going to earn our way out.’
The main Budget proposals announced are:
- A further increase in the personal allowance but with a reduction in the basic rate band from April 2013.
- A reduction in the additional rate of income tax from 50% to 45% from April 2013.
- A phasing out of the age related personal allowances.
- Details of how Child Benefit will be taxed on those with income in excess of £50,000.
- An additional 1% cut in the main rate of corporation tax to 24% from April 2012.
- Increased Stamp Duty Land Tax on high value residential properties.
Details of the announcements and supporting documentation can be found on the Treasury website using the link below.
Internet link: Treasury Website Budget page
Increased personal allowance for 2012/13
For those aged under 65 the personal allowance will be increased by £630 to £8,105. This increase is greater than the minimum required and is part of the plan of the government to ultimately raise the allowance to £10,000.
The personal allowance is reduced by £1 for every £2 of adjusted net income over £100,000. So for 2012/13, the allowance ceases at adjusted net income in excess of £116,210.
Tax band and rates 2012/13
The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced to £34,370 so that the threshold at which the 40% higher rate of tax applies will remain at £42,475.
The 50% additional rate of tax currently applies where taxable income exceeds £150,000.
If dividend income is part of total income this is taxed at 10% where it falls within the basic rate band, 32.5% where liable at the higher rate of tax and 42.5% where liable to the additional rate of tax.
Changes for 2013/14
The personal allowance is to increase to £9,205. The band of income taxable at this rate is being reduced to £32,245 so that the threshold at which the 40% band applies will reduce to £41,450.
For 2013/14 the 20% basic rate and 40% higher tax rates remain unchanged. However the 50% additional rate tax will be reduced to 45%. A rate of 37.5% will be payable on dividends liable to the additional rate of tax.
There had been widespread speculation that the 50% top rate of tax would be abolished.
Internet link: HMRC Budget information
Age allowances
It was announced in the Budget that from 2013/14 the higher 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 £10,500 allowance
- 5 April 1938 for the £10,660 allowance.
This has been labelled the ‘granny tax’ by many as the increased allowances will no longer be available to those reaching age 65 and 75 respectively.
Internet link: HMRC Budget information
Child Benefit
Legislation will be introduced to impose a new charge on a taxpayer who has adjusted net income over £50,000 in a tax year where either they or their partner are in receipt of Child Benefit for the year. Where both partners have adjusted net income in excess of £50,000 the charge will apply to the partner with the higher income.
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.
This charge will have effect from 7 January 2013 and for 2012/13 will apply to the Child Benefit paid from that date to the end of the tax year. The income taken into account will be the full income for 2012/13.
The removal of Child Benefit from households containing a higher rate taxpayer had been announced previously. However the detail of the way in which the restriction would apply had been subject to speculation. The following HMRC example shows how the charge will be calculated:
The Child Benefit for two children amounts to £1,752 and the taxpayer’s adjusted net income is £54,000.
The income tax charge will be £700.80 which is calculated as £17.52 for every £100 above £50,000.
For a taxpayer with adjusted net income of £60,000 or above the income tax charge will equal the Child Benefit.
Internet link: HMRC Budget information
Corporation tax rates
A further reduction in the main rate of corporation tax has been announced. The planned 1% decrease announced to take effect from 1 April 2012 is now to be a 2% decrease with the rate moving from 26% to 24%. Further 1% reductions to 23% and 22% are to take place from 1 April 2013 and 1 April 2014 respectively. The small company rate will remain at 20%.
Internet link: HMRC Budget information
Stamp duty land tax (SDLT)
A new rate of 7% will be introduced where the chargeable consideration for a residential property is more than £2 million. This will have effect where the effective date (normally the date of completion) is on or after 22 March 2012, unless the contract was entered into before that date.
An even higher rate of 15% will apply to such residential properties if the purchaser is a ‘non natural person’, for example a company. This will have effect where the effective date of the transaction is on or after 21 March 2012.
In addition the government will consult on the introduction of:
- a SDLT annual charge where properties over £2 million are owned by non natural persons
- a CGT charge on residential property owned by non resident, non natural persons.
Both these measures will apply from April 2013.
The intention of the 15% charge is to stop or reduce the number of schemes which claim to allow a property to be transferred without SDLT. The charges to be introduced in 2013 are aimed at charging properties already in companies which are used as residential accommodation.
Internet link: HMRC SDLT Budget changes
Employer end of year forms
HMRC are reminding employers that in order to avoid penalties they must file the Employer Annual Return (P35 and P14s) online and on time. The vast majority of employers must file electronically and the deadline for submission of the forms is 19 May 2012 which this year falls on a Saturday.
To avoid unnecessary late filing penalty notices being issued, where no return is necessary, it is important to advise HMRC that no return is due. This can be done using the link below.
If you are unsure whether you need to complete a return this year please do get in touch.
Internet links: HMRC guidance No P35 online form
Reimbursing additional household expenses
From 6 April 2012 HMRC are increasing the guideline rate which employers can use to reimburse employees for additional household expenses incurred because they have to work from home to £4 per week (currently £3 a week). To find out more about the circumstances when these expenses can be reimbursed please do get in touch.
Internet link: HMRC expenses and benefits
Advisory fuel rates for company cars
New company car advisory fuel rates have been published to take effect from 1 March 2012. HMRC’s website states:
‘These rates apply to all journeys on or after 1 March 2012 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’
The advisory fuel rates for journeys undertaken on or after 1 March 2012 are:
| Engine size | Petrol | Diesel | LPG |
| 1400cc or less | 15p | 10p | |
| 1401cc – 2000cc | 18p | 12p | |
| Over 2000cc | 26p | 18p | |
| 1600cc or less | 13p* | ||
| 1601cc – 2000cc | 15p | ||
| Over 2000cc | 19p* |
Please note that only two of the diesel rates have changed. These two rates marked * have both increased by one pence per mile.
Other points to be aware of about the advisory fuel rates:
- Employers do not need a dispensation to use these rates.
- Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
- The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.
If you would like to discuss your car policy, please contact us.
Internet link: HMRC fuel advisory rates
Updated guidance on Gift Aid and new declarations
HMRC have updated their guidance on Gift Aid declarations and provided new model declarations. They have also developed a new checklist of the minimum information to be included in a declaration if a charity decides to create and use its own declaration form.
Internet link: HMRC Charities Gift Aid
National Minimum Wage rates
The government has accepted the Low Pay Commission’s recommendations for National Minimum Wage rates from 1 October 2012.
From 1 October 2012:
- the adult minimum wage rate will increase from £6.08 to £6.19 an hour
- the youth development rate will remain at £4.98 an hour
- the 16-17 year old rate will remain at £3.68 an hour and
- the apprentice rate will increase from £2.60 to £2.65 an hour.
The Chair of the Low Pay Commission David Norgrove said:
‘Our recommendations this year are, as ever, based on extensive economic evidence and take account of the prospects for the UK economy. Although the economy is forecast to grow through 2012 and 2013, the expected pace of growth is uncertain and is likely to be low. We believe our recommendations for October 2012 balance the needs of low-paid workers against the challenges facing businesses, particularly small businesses.’
Internet link: Press release
National Loan Guarantee Scheme
The Chancellor George Osborne has launched the National Loan Guarantee Scheme (NLGS), which is designed to help ‘smaller businesses’ across the UK access cheaper finance. The loans will be available to businesses with an annual group turnover of up to £50 million.
According to the press release:
‘The government is using the UK’s budget credibility in financial markets to provide up to £20 billion of government guarantees on unsecured borrowing by banks, enabling them to borrow at a cheaper rate. Around £5 billion in guarantees will be made available in the first tranche.’
Businesses that take out an NLGS loan will receive a discount of 1% compared to the interest rate that they would otherwise have received from that bank outside the scheme.
George Osborne said:
‘The government promised to help small businesses get access to lower interest rates. Today, we deliver on that promise with a nationwide scheme. It’s only because we’ve earned credibility with our deficit reduction plan that we have low interest rates, and it’s only because of this scheme that we can pass the benefits of those low rates onto businesses.’
Internet link: Press release