Marshall Smalley 2012 Budget Overview

The Budget delivered on 21 March 2012 was announced as a budget for business and workers to help us earn future growth in the economy. For example, tax rates for companies of all sizes are reduced and for workers we have a significant increase in the personal allowance along with the top rate of income tax reduced to 45% from 6 April 2013.
We hope this is a useful summary of some of the main changes.

BUSINESS TAXES
Corporation Tax: from 1 April 2012, the main rate of corporation tax will be reduced to 24% and then to 23% from 1 April 2013.
Small companies’ rate: as previously announced, this will be 20% from 1 April 2012. The effective rate of tax for profits between £300,000 and £1,500,000 is 25% for the year ending 31 March 2013.
Capital allowances: as previously announced, writing-down allowances will be reduced to 18% from April 2012 and the Annual Investment Allowance (AIA) reduced to £25,000.
Mileage allowance payments: from 6 April 2012, 45p per mile (no change) can be claimed for the first 10,000 miles per year travelled by an employee on business.
Research and development (R&D): as previously announced from 1 April 2012, the rate of the additional deduction available for undertaking R&D will increase from 100% to 125% of qualifying expenditure.
PERSONAL TAXES
Income tax: as previously announced in Budget 2011, the personal allowance will increase to £8,105 from 6 April 2012 and the basic rate will be reduced to £34,370. Budget 2012 has announced that, from 2013/14, the personal allowance will be increased to £9,205 and the basic rate limit reduced to £32,245.
Age Allowance: from 6 April 2013 the age related personal allowance will not be increased and they will cease to be available to those under 65 at that date.
National insurance: from 6 April 2012 the employee’s national insurance rate is 12% below the upper earnings limit and 2% above that, the rate of employer’s national insurance contributions is 13.8%.
Inheritance tax: as previously announced, the £325,000 threshold for the nil-rate band is frozen. In addition, where 10% or more of a deceased’s net estate is left to charity the rate of IHT will be reduced to 36% from 6 April 2012.
Capital Gains Tax: the annual exemption for 2012/13 is unchanged at £10,600.
Entrepreneurs Relief (ER): from 6 April 2012, the lifetime limit of gains which can benefit from ER remains at £10m.
Individual Savings Accounts: the annual limit is to be increased to £11,280 for 2012/13, up to half of which can be saved in cash deposits.
Child Benefit: from 6 April 2012 child benefit is restricted by 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. The income tax charge will apply at a rate of one per cent 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. 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. 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.
PROPERTY
Stamp Duty Land Tax (SDLT): a new increased 7% rate for purchases of residential property over £2 million will apply to some houses from 22 March 2012.
VAT
Registration and de-registration thresholds: the registration threshold will increase to £77,000 and the de-registration threshold to £75,000. Both changes apply from 1 April 2012.