Marshall Smalley 2013 Budget Overview

 

The Budget delivered on 20 March 2013 was business tax friendly with few surprises.

We hope this is a useful summary of some of the main changes.

 

BUSINESS TAXES

Corporation Tax: from 1 April 2015, the main rate of corporation tax will be reduced to 20% so the rate will be the same for all companies whatever their taxable profits.

Small companies’ rate: as previously announced, this will be 20% from 1 April 2013 with the full rate being 23%.  The effective rate of tax for profits between £300,000 and £1,500,000 is 23.75% for the year ending 31 March 2014.

Capital allowances: the rates and thresholds of the main capital allowances from April 2013 are an 18% writing-down allowances and the Annual Investment Allowance (AIA) cap is £250,000.

Employment allowance: the significant announcement for employers is that from 6 April 2014 £2,000 each tax year can be offset against Class 1 NI contributions.

Loans to participators: the rules that tax loans to a shareholder in close companies are being tightened to restrict the repayment relief so it only applies were there has been a genuine repayment. .

PERSONAL TAXES

Income tax: as previously announced in the Autumn Statement, the personal allowance increases to £9,440 from 6 April 2013 and the basic rate tax band will be reduced to £32,010. The additional rate of tax chargeable on income over £150,000 reduces to 45% for 2013/14 tax year. Budget 2013 has announced that, from 2014/15, the personal allowance will be increased to £10,000 and the basic rate limit reduced to £31,865.

National insurance: from 6 April 2013 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: the £325,000 threshold for the nil-rate band is frozen until 2017/18.

Capital Gains Tax: the annual exemption for 2013/14 is increased to £10,900.

Entrepreneurs Relief (ER): from 6 April 2013, the lifetime limit of gains which can benefit from ER remains at £10m.

Individual Savings Accounts: the annual limit is to be increased to £11,520 for 2013/14, up to half of which can be saved in cash deposits.

Childcare voucher scheme: the Government have announced a consultation aimed at extending tax relief to employees whose employers do not offer childcare tax vouchers and the self employed too. The new system planned to start from Autumn 2015 will operate through an online account with the Government matching every 80p of parental contribution with 20p up to a maximum total of £1,200 each year.

VAT

Registration and de-registration thresholds: whilst the VAT rates remain unchanged the registration threshold will increase to £79,000 and the de-registration threshold to £77,000; both changes apply from 1 April 2013.