My thanks go to Brian D. Hogg of Brian Hogg Accountancy for writing this excellent review of the recent Budget. Brian Hogg Accountancy delivers a professional and efficient accountancy service geared to small and medium sized companies.You can contact Brian on 01604 781 593.
Mr. Osborne claimed that his Budget was aimed at the simplification and modernisation of the Tax System, the removal of barriers to the UK’s competitiveness and a warning of dire consequences for undertaking ‘morally repugnant’ aggressive tax avoidance.
But how does this affect the average small business person?
As previously announced, the personal allowance at which normally you start to pay tax will be £8,105 from 6th April, 2012 increasing to £9,205 from 6th April, 2013.
Basic rate tax will remain at 20% and from 2012/13 this will be on the first £34,370 of taxable income, reducing to £32,245 from 6th April 2013. This means that most people with income over (£8,105 + 34,370) £42,475 for 2012/13 will have the excess taxed at least at 40%
Age related tax allowances are to be phased out (The Daily Mail refers to this as a ‘Granny Tax’)
The 50% tax rate on income over £150,000 is to be reduced to 45% on the grounds that it ‘raised next to nothing’ and the lower rate will encourage high rate tax payers to remain in the country!
Will be reduced incrementally when someone in a household has an income of more than £50,000. It will fall by 1% for every £100 earned over £50,000. Anyone earning more than £60,000 will lose the benefit completely.
It appears that child benefit will still be paid to all, but claimants will have to fill out self assessment tax forms and they will have the relevant amount reclaimed via their tax assessments.
Although reductions were announced in the main rate of Corporation Tax, there were no changes in the threshold rates for small companies (profits up to £300,000), which remains at 20%.
As previously announced, the annual writing-down allowance (main Pool) will be reduced to 18% instead of 20%. The maximum annual amount of 100% Annual Investment Allowance is being reduced from April 2012 to £25,000 (previously £100,000). These reductions could be significant in terms of cash flow for businesses making significant investments in capital items such as vans or lorries exceeding £25,000 per annum.
The emission thresholds for cars are changing to match the emissions target. This could mean reduced capital allowances for businesses buying or leasing cars.
There are no changes to previously proposed rates, but detailed consultations are to start on integrating the operation of National Insurance and Income Tax. This seems a good way to keep civil servants busy for a long time.
Capital Gains Tax
Not much change here. The annual exemption in 2012/13 will be £10,600 with tax on gains within the basic rate income tax band being at 18% and gains above at 28%. Entrepreneur’s relief on qualifying business disposals gives an effective rate of 10%.
If you are buying a house costing over £2m you are probably not living in Northamptonshire, so the increase in rates will not affect most of us.
No change in 40% rate or threshold of £325,000.
The VAT registration turnover threshold has been increased to £77,000 from 1st April, 2012 (previously £73,000). Remember this is a rolling 12 month period not the accounts year or tax year.
There are some proposed changes to the supply of hot food (an outrageous attack on those of us who enjoy hot pies and pasties?) and static caravans.
SO ~ did the Chancellor do anything to help small businesses? I am still looking but let me know if you find anything!
The above is just a summary of part of the Budget. There may be other items that affect you particularly. Speak to your Accountant for advice on your own circumstances.