On 5th December 2012, the Chancellor of the Exchequer, George Osborne, announced his second Autumn Statement which provides an update on the Government’s plans for the economy, based on the latest forecasts from the Office for Budget Responsibility.
Legislation will be introduced in Finance Bill 2013 to make these changes announced and will initially be published in draft form on 11th December 2012. Draft clauses published on the same day, are open to consultation and scrutiny until 6th February 2013.
Based on previous experience, Finance Bill 2013 will closely follow Budget 2013 - probably receiving its Royal Assent in July 2013.
Autumn Statement 2012 Highlights:
All basic rate tax payers - Presently, the personal allowance is £8,105 and under original plans, it was set to increase to £9,205 in 2013/14. But it was announced today, that from April 2013 the personal allowance will instead increase to £9,440. This means basic rate tax payers (those with income under £41,450) will be better off by £267 in 2013/14 compared to 2012/13.
All higher rate tax payers - Needless to say, higher rate tax payers will benefit from the increase in the personal allowance next year. However, as a result of the higher rate income threshold falling, they will only be better off by £62 in 2013/14.
All higher rate tax payers - In 2014/15 and 2015/16 the higher rate threshold for income tax will increase by 1 per cent rather than inflation. In 2014/15 the threshold will therefore be £41,865 and in 2015/16 it will be £42,285.
Business vehicle users - The 3.02 pence per litre fuel duty increase that was due to take effect on 1st January 2013 will be cancelled and the increase that was planned for 1st April 2013 will be deferred until 1 September 2013.
Considering big purchases of equipment and vans - The Annual Investment Allowance was slashed dramatically from £50,000 to just £25,000 in April 2012. However it was announced that the allowance will temporarily increase to £250,000 for a 2 year period commencing on 1st January 2013.
Operating from business premises - The Government will extend the temporary doubling of the Small Business Rate Relief scheme in England for a further 12 months from 1st April 2013. Over half a million small businesses will benefit from this extension, with 350,000 not paying any business rates until April 2014. Please note, rates reliefs are handled differently in Scotland, Wales and Northern Ireland.
Small companies - The Government is keen to show the UK is “open for business” and want it to be one of the most competitive tax systems in the world. As a result, they have announced a further decrease in the main rate of corporation tax from April 2014 to 21%- which will apply to companies with profits in excess of £300,000. Disappointingly, no comparable reduction was seen for small companies with profits below £300,000, who will see their rate of corporation tax remain at 20% for the foreseeable future.
Pensions tax relief - From 2014/15, the tax relief on pension contributions will be cut in two ways:
- the annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000
- the standard lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million
- Loss-making businesses - From April 13 there will be a limit on certain income tax reliefs that were previously uncapped. This will include, amongst other things, the amount of trade losses that can be offset in a tax year. The cap on relief is £50,000 or 25% of income in the year of offset(which could be an earlier year if losses are carried back), whichever is higher. The original announcement in the Budget 2012 proposed that this cap would also apply to relief on charitable donations, however, this was soon reversed. The Autumn Statement has reiterated that charitable donations will be exempt from this cap.
By Jo Nockels | Google+ Profile