Budget Summary 2012
Most of the key changes in the Budget had already been leaked before the Chancellor stood up, although not necessarily the exact details. There were a few headline grabbing changes but there were few unexpected ones. As usual the Chancellor started by running through the main economic statistics:
- Growth remains slow running at 0.8% for 2011 but future forecasted increases of around 2% are still expected
- Inflation is expected to fall for the remainder of 2012 and to be close to the Bank of England target of 2% by the beginning of 2013
The government continues its deficit reduction plan and plans no giveaways from the sale of the Post Office whose pension scheme is being taken over by the public sector. The actual announcements:
Introduction
- There will be an automatic review of the state pension age to keep pace with longer life expectancy
- National Loan Guarantee scheme – to encourage bank lending, the banks reacted to this just before Budget day by offering preferential interest rates and Barclays are even offering a cashback
- Local news – there is a move to look further at airport capacity in the South East, it appears the pressure will be on for an Estuary airport
- New Enterprise zones being introduced in Scotland, Wales and Northern Ireland with opportunity for enhanced capital allowances
- Increased support for life science, aerospace, film and particularly the video game industry
- Olympic news – there will be extended Sunday opening hours for 8 weekends around the Olympics
Entrepreneurs and business
- Small companies corporation tax rate remains at 20%
- The expected “Main corporation tax rate” from 1 April 2012 has been cut by 1% to 24%, and will reduce in the next two years by 1% pa to 22% and will ultimately reduce to 20% – one of the lowest rates in the G20
- Small unincorporated businesses turning over less than £77k will be allowed to submit tax returns on a cash rather than accrual basis
Individuals and families
- The much leaked and politically motivated increase in the rate of personal allowance has taken one step closer to £10k, with an increase to £8105 for 2012/13 (already released) and £9205 for 2013/14
- The “granny tax” – age related allowances are going to be phased out as personal allowance levels approach £10k, any loss will be outweighed by increased state pensions
- 20k taxpayers will receive a Personal tax statement breaking down how much tax they have paid and what it has been used for – a little like the statement we already receive for council tax annually
- Rather than restricting child benefit for higher rate taxpayers, it will only be phased out for earners over £50k in the household, being lost totally by £60k income
High earners
- Stamp duty increase for residential properties over £2m will be 7% (15% where owned by corporate bodies and capital gains tax to be charged on these properties too)
- Top rate of tax to be reduced from 50% to 45% from April 2013, this caused massive distortions and only raised 1/3 of the expected revenues
- A limit on currently uncapped tax reliefs means that anyone claiming over £50k reliefs, a cap will be set at 25% of income – this will restrict the amount high earners can benefit from the reliefs available
Motorists, fuel and duties
- Motorists – vehicle excise duty will increase by inflation for cars but frozen for HGVs
- Fuel duty rises will go ahead but will not be more than inflation unless oil prices fall below £45 per barrel
- Smokers, drinkers and gamblers – Tobacco duties increased by 5% over inflation from 6pm on Budget day, 37p per pack. No increases in alcohol duties, various measures being introduced to ensure overseas online gambling has no advantage over UK based establishments
More changes will be released over the next few days, but the summary above is based on our understanding of the Budget and you should seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend – Accountants who “speak your language”
