If you missed the Chancellor’s latest budget statement, or haven’t had a chance to digest it yet, here are the highlights. While doom and gloom still surrounds government finance, there are some surprises that may be positive news for UK businesses.
We already knew that the main Corporation Tax rate for 2013-14 is 23% and the Small Profit rate 20%. But the surprise is that the following year the main Corporation Tax rate will be cut by a further 1% to 21%. There is no lower main rate in any western economy, making the UK an attractive place for international businesses.
Meanwhile, the Annual Investment Allowance will increase tenfold to £250,000 in the calendar years 2013 and 2014, to stimulate more investment by businesses in the UK.
The top income tax rate will be reduced from 50% to 45% (42.5% to 37.5% for dividend income) as per the 2012 budget. Interestingly, the increase in the income tax higher rate threshold will be capped at 1% for 2014-15 and the following year. So it’s likely that more people will end up paying the higher rate – the increase is less than inflation, salaries are expected to rise faster.
Another modest surprise is that the Government is raising the tax free personal allowance by more than expected, to £9,440, in 2013. For the same period the annual exempt amount for capital gains tax is set to go up by 1% each year.
The Inheritance Tax nil-rate band will be set at £329,000 for 2015-16, an increase of 1%, rounded up. It is still frozen until then at £325,000.
Allowances for pensions tax relieved savings are to be reduced from the tax year 2014-15. The annual allowance will be cut to £40,000 from £50,000 and the standard lifetime allowance reduced to £1.25 million from £1.5 million.
Everything else we already knew. Previously unlimited tax reliefs are set to be capped at 25% of an individual’s income, or £50,000, whichever is greater. From 6 April 2013, a new statutory residence test will bring clarity to people trying to determine their residence status. And the Government wants to introduce employee shareholder status, whose holders receive shares, the first £2000 of which may be exempt from income tax and National Insurance.