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2012 Budget Headlines
• Personal Allowances
• Capital taxes
• Business Tax
The big news for individuals is that the personal allowance will increase to £9,205 from 6 April 2013, so you have to wait another year for that extra tax-free income. The personal allowance has already been increased by £630 from 6 April 2012 to £8,105, and the other allowances are increased as indicated below.
A source of complexity for older taxpayers is the application and withdrawal of age-related allowances, which are currently given when the taxpayer reaches age 65. These age-related allowances are withdrawn when the taxpayer’s total income exceeds £25,400 (for 2012/13).
From 6 April 2013 those who reach age 65 on or after that date will not receive an age-related allowance, but will instead be entitled to the standard personal allowance of £9,205. This allowance is expected to rise to £10,000 in April 2014 or 2015. The existing age allowances given to people born before 6 April 1948, will be frozen at current rates as shown below.
Capital Gains Tax
There has been no change in the rates or thresholds for capital gains tax (CGT):
The rates for 2012/13 are…
Annual exemption – £10,600
Annual exemption for most trustees – £5,300
Rate for gains in basic rate band – 18%
Rate for gains above basic rate band – 28%
Rate for gains subject to entrepreneurs’ relief – 10%
Lifetime limit for entrepreneurs’ relief – £10,000,000
You pay stamp duty when you purchase a property in the UK. There has been a lot of talk about how some people have avoided paying SDLT on high value homes. The tax avoidance scheme usually involves an off-shore company.
To deal with such schemes the Government has introduced new rates of SDLT on purchases of residential property valued at £2 million or more:
– 7% charge on purchases by individuals from 22 March 2012; and
– 15% charge on purchases made on or after 21 March 2012, by companies, collective investment schemes, or partnerships where a member is a company or a collective investment scheme.
An annual tax charge may also be applied to the value of residential property held by certain companies, where each property is worth £2 million or more. Any such charge will apply from April 2013.
Currently only UK resident individuals pay CGT on gains, even when the property is located in the UK. The Government is considering how CGT can be applied to gains made on residential property in the UK, when the owner is resident in another country. Any changes will apply from April 2013 at the earliest.
If you acquire shares through an approved share option scheme run by your employer, you must pay CGT on gains made when you sell those shares, after deduction of your annual exemption. The CGT will be charged at 18% or 28%, as the conditions for the entrepreneurs’ relief rate of 10% are unlikely to be met. The Government is considering changing the rules for approved share option schemes so the 10% rate can apply to shares acquired by employees. Any changes will apply from 6 April 2013 or later.
The inheritance tax (IHT) nil rate band remains frozen until 2014/15. This is the amount of a person’s estate that is free of inheritance tax. However, for deaths occurring on and after 6 April 2012, when at least 10% of their estate has been left to charity, a reduced rate of IHT applies to the chargeable estate. Gifts made to charities are exempt from IHT.
The limits and rates for 2012/13 are…
Nil rate band: £325,000 (2011/12 – £325,000)
Rate payable on death: 40% (2011/12 – 40%)
Rate payable when 10% of estate left to charity: 36% (2011/12 – 40%)
Rate payable on lifetime gifts to certain trusts: 20% (2011/12 – 20%)
The Government wants to simplify the accounts small businesses (partnerships and sole-traders) have to prepare for tax purposes. It is consulting on whether preparing accounts on a cash basis would be easier, and standard allowances could be used for the business use of vehicles and the proprietor’s home. Any changes are likely to apply from April 2013 or later.
The small profits corporation tax rate remains the same at 20% for the year from 1 April 2012.
However the main rate for large companies is reducing from 26% to 24% and will be 22% by the year from 1 April 2014.
The rates and thresholds of the main capital allowances will apply as follows for 2012/13…
Main pool: writing down allowance: 18% (2011/12 – 20%)
Special rate pool: writing down allowance: 8% (2011/12 – 10%)
Annual Investment Allowance (AIA) cap: £25,000 (2011/12 – £100,000)
Cars and Car Fuel
The tax charge for the private use of a company car is based on a percentage of the list price of that car when new, the percentage being based on the vehicle’s CO2 emissions.
From 6 April 2012 cars with CO2 emissions in the band 76-99g/km will be taxed at 10% of list price. Those with CO2 emissions of 100g/km will be taxed at 11% of list price, with the percentage increasing in 1% steps for each additional 5g/km. From 6 April 2013 the 10% list price band will reduce again to 76-94g/km. A car with CO2 emissions of just 115g/km will then be taxed at 15% of list price.
From 6 April 2014 the 11% of list price will apply to cars with CO2 emissions in the band 76-94g/km, with a 1% step up for every addition 5g/km of CO2. From 6 April 2015 the minimum percentage of list price will be 13%, and from 2016 the minimum percentage of list price increases to 15%.
Where a company car driver receives free fuel, the taxable benefit is calculated as the percentage of the list price for the car applied to a set value, currently £18,800. This will rise to £20,200 from 6 April 2012. The maximum taxable benefit of receiving free road fuel for private use will increase from £6,580 (for 2011/12) to £7,070.
The taxable benefit when fuel is provided for private use in a company van is frozen at £550 for 2012/13.
The VAT rates remain unchanged at…
Lower rate: 0%
Reduced rate: 5%
Standard rate: 20%
The registration and deregistration limits from 1 April 2012 are…
Registration turnover: £77,000 (1 April 2011 – £73,000)
Deregistration turnover: £75,000 (1 April 2011 – £71,000)
Changes from 2013
The following changes to the VAT rules will be made in 2013…
– The standard rate of VAT will apply to the supply and installation of energy saving materials in non-residential buildings used for non-business purposes by charities. Currently the lower rate of VAT applies
– The invoicing rules will be simplified
– Exemptions will be introduced for commercial Universities
– Cable-car rides will attract the reduced rate of VAT, where each cable car holds fewer than 10 passengers.
The Government is consulting on the existing VAT law in the following areas, so expect changes in the future…
– Hot take-away food
– Sports nutrition drinks
– Self storage
– Hair-dressers’ chair-rental and
– Alterations to listed buildings.
For full details of budget report visit: www.twdaccounts.co.uk/2012budget
To ask a tax question fill in our Online Advice Form – www.twdaccounts.co.uk/TaxAdviceForm