The Chancellor has delivered his eagerly awaited 2012 Autumn Statement to a packed House of Commons. As expected the main focus was on the poor state of the economy and the fact that it is taking much longer to recover than originally envisaged with austerity measures to be extended until 2018!
There was however some good news for both personal taxpayers, with a significant increase in the tax-free personal allowance for 2013/14, as well as business taxpayers with a massive ten-fold increase in the annual investment allowance from £25,000 to £250,000.
PERSONAL TAXES
- The personal tax allowance for 2013/14 is to be increased by £1,335 to £9,440 ~ with the target figure of £10,000 now within touching distance
- The higher rate threshold (including the tax free personal allowance) at which the 40% income tax rate starts will be £41,450 for 2013/14, then £41,865 for 2014/15 and £42,285 for 2015/16
- The current top rate of income tax of 50%, applicable to incomes above £150,000, is to be reduced to 45% from April 2013 (as previously announced)
CAPITAL TAXES
- It seems that the current capital gains tax annual exemption of £10,600 is to be again frozen for 2013/14 with only modest increases planned for the following two tax years. It should reach £11,100 by April 2015
- The Inheritance Tax nil rate band of £325,000 (currently frozen since 2009) is to be increased from April 2015 to £329,000
- The Chancellor confirmed that there is to be no ‘mansion tax’ on high value properties
BUSINESS TAXES
- Starting on 1 January 2013, and for the next two years, the Annual Investment Allowance, which provides 100% tax relief on plant, equipment and commercial vehicles, is to be increased TEN FOLD from £25,000 to £250,000
- The main rate of corporation tax will fall to 21% from April 2014 (the lowest rate of any major western economy). The rate from April 2013 will be 22%
- No changes were announced to the current ‘small companies’ rate of 20% which applies to annual profits up to £300,000
- The Small Business Rate relief scheme is to be extended to April 2014
NATIONAL INSURANCE CONTRIBUTIONS
- Class 1 primary National Insurance Contributions (NICs) payable by EMPLOYEES will remain at 12% for 2013/14 on income between £7,755 and £41,450 in line with the higher rate threshold. A rate of 2% applies on income above £41,450
- Class 1 secondary NICs payable by EMPLOYERS will remain at 13.8% on income above £7,696 (with no ceiling)
- Class 4 NICs for 2013/14 will be payable at a rate of 9% (unchanged) on self-employed profits between £7,755 and £41,450 in line with the higher rate income tax threshold. A rate of 2% applies on profits above £41,450. Class 2 NICs increase to £2.70 per week
FUEL DUTY
- The 3p per litre fuel duty increase planned for January 2013 has been cancelled completely.
PENSIONS TAX RELIEF
- The maximum annual pension contribution on which tax relief is available is to be reduced to £40,000pa from April 2014 (down by £10,000 from the current £50,000)
- The lifetime allowance is to be reduced to £1.25 million from the current £1.5 million
PERSONAL INVESTMENTS
- Individual Savings Account (ISA) annual investment limit is to be increased to £11,520 from April 2013 (although only £5,760 of the limit can be invested in a cash ISA)
- The Government is to consult on allowing investment in certain SMEs to be held directly through Share ISAs to encourage investment in growing businesses
VALUE ADDED TAX
- There were no changes announced to the rates or rules of VAT
TAX AVOIDANCE
- From 2013/14 a first ever General Anti-Abuse Rule (GAAR) relating to tax avoidance is to be introduced
- Hundreds of millions of pounds of tax loopholes are being closed with immediate effect
- More resources are to be put into ensuring multinational companies pay their proper share of taxes
BENEFITS
- There will be a 2.5% increase in the basic state pension from 2013/14 rising to £110 per week
- Child benefit, which is currently frozen, will increase by only 1% per year for two years from April 2014
