Origin Financial A Guide To Budget 2012 Singles

1.
A Guide to BUDGET 2012 Howwill the Chancellor’s announcements affect you and your family?

2.
02 A Guide to Budget 2012 A Guide to Budget 2012 What the Chancellor had to say Welcome to ‘A Guide to Budget 2012’. Inside we predicted, Mr Osborne said. “No Chancellor can look at many of the pre-announcements made in justify a tax rate that damages our economy Budget 2011 and the proposed measures that will and raises next to nothing.” take effect from 6 April 2013. He also said a further £1,100 rise in the The Chancellor of the Exchequer, George threshold at which income tax is paid from next Osborne, presented his third Budget speech to year would benefit “every working person on low Parliament on, 21 March 2012. It maintained the or middle incomes” and amounted to an extra government’s strategy to reduce the deficit, £220 a year each - or £170 after inflation. contained far-reaching tax reforms and support Biggest cash increase in the state pension ever for growth and reward for work. Allowances are currently more generous for the The Chancellor set out the actions the over-65s - at £10,500 up to age 74 and £10,660 government will take in three areas - creating after that. But they will be frozen, and stopped a stable economy, a fairer, more efficient and for anyone turning 65 after 5 April 2013. Mr simpler tax system and further reforms to Osborne said it would ‘simplify’ allowances and support growth. no pensioner would lose out “in cash terms”. He pointed to April’s “biggest cash increase in the Cutting the tax rate state pension ever” of £5.30 a week. Mr Osborne announced he would be cutting the HM Revenue and Customs figures also show tax rate for earnings over £150,000, saying in that 300,000 people will be drawn into paying his Budget it raised “next to nothing.” He is also the 40% higher rate tax from 2013/14 because of going to raise the threshold at which people start a reduction in the threshold to £41,450. paying tax to £9,205 which it is estimated will A new 7% rate of stamp duty land tax would leave millions of working people over £200 better be charged on residential properties worth more off, but 4.4 million pensioners will be worse off than £2m - and anyone trying to buy a £2m home next year when age-related tax allowances are through a company would face a punitive 15% frozen and come to an end. stamp duty rate. Presenting his Budget speech, the Chancellor said: “This Budget supports working families and Avoiding a “cliff edge” effect helps those looking for work. Child benefit had been due to be removed from all families with at least one parent paying the Unashamedly backing business higher, 40% rate, of income tax - about £43,000 - “It unashamedly backs business. And it is on the from January 2013. side of aspiration: those who want to do better But Mr Osborne said he wanted to avoid a “cliff for themselves and for their families.” edge” effect - so it would now only be withdrawn He defended the decision to cut the top rate when someone in a household earned more than of tax by saying five times as much would be £50,000, at a rate of 1% of the benefit for every £100 raised from the wealthiest by other tax and anti- up until £60,000, when it would be cut entirely. avoidance measures being brought in. He said the rate was the highest among To discuss how the Budget 2012 G20 countries and damaged competitiveness. changes could have impacted A report into the highest rate had found it on your financial plans, please had raised just a third of the £3bn initially contact us for further information.

3.
A Guide toBudget 2012 03 Contents 04 Economy and public finances Unwavering commitment to deal with Britain’s 16 Combining the two state pensions into one simplified pension record debt Pensioners will receive a flat-rate state pension, initially it is estimated that it will be worth about 06 Budget 2012 at a glance The key announcements from the Chancellor’s £140 a week third Budget speech 17 Government plans to withdraw child benefit from parents who 08 Budget 2012 briefing Income tax rates earn higher levels of income “All sections of society must make a contribution to dealing with the deficit” 08 Budget 2012 briefing Income tax personal allowance 2012/13 18 Budget 2012 briefing Pension contributions for spouses or family members 08 Budget 2012 briefing Income tax age-related allowances 18 Budget 2012 briefing Income tax rules on interest 08 Budget 2012 Who can expect to be ‘better’ off following 18 Budget 2012 briefing George Osborne’s Budget speech? Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) 09 Budget 2012 Who can expect to be ‘worse’ off following George Osborne’s Budget speech? 19 Budget 2012 briefing Enterprise Management Incentives (EMI) 10 What the numbers mean to you 2012/13 Taxation and Allowances guide 19 Budget 2012 briefing Anti avoidance: Life insurance policies 12 Current 50p top tax rate will be cut to 45p 20 A Budget for business Changes that could greatly affect the UK’s small £16 billion of income was deliberately shifted into and medium-sized enterprises the previous tax year – at a cost to the taxpayer of £1 billion 21 Budget 2012 briefing Changes to Registered Overseas Pension Scheme 13 Budget 2012 briefing Tax evasion and aggressive tax evasion rules members 13 Budget 2012 briefing Inheritance Tax matters 14 “Simplifying” the tax system and spreading tax relief across everyone Extra allowance will gradually reduce for pensioners, whose taxable income is between £24,000 and about £29,000

4.
04 A Guide to Budget 2012 Economy and public finances Unwavering commitment to deal with Britain’s record debt The UK economy will grow more the growth forecast for 2013 was revised Unemployment expectations were quickly this year than previously down. The OBR now projects 2% growth unchanged, with a jobless rate of forecast, Chancellor George Osborne in 2013, down from the 2.1% it estimated 8.7% forecast for this year, 8.6% in announced during his Budget speech. in November. 2013, 8.0% in 2014 and 7.2% in 2015. The independent Office for Budget In 2014 the economy is expected to The unemployment rate for 2016 was Responsibility (OBR) forecasts growth grow by 2.7%, while growth of 3% is revised up slightly from 6.2% to 6.3%. of 0.8% in 2012, compared with its projected in both 2015 and 2016, in line The OBR forecast one million more autumn estimate of 0.7%. with the previous forecast. jobs in the economy over the next five The OBR also now estimates that Mr Osborne said that the crisis in the years and it revised its estimate for the the government will borrow £1bn less eurozone remained a major risk to the claimant count - the number of people than previously forecast this year. Mr OBR’s forecast, while another risk came claiming Jobseeker’s Allowance - Osborne said his Budget signalled the from a “further spike in oil prices”. down by about 100,000 for each of government’s “unwavering commitment Earlier, figures from the Office for the next four years. It is now expected to deal with Britain’s record debt.” National Statistics showed that the to peak at 1.67 million this year, rather Total borrowing up to the tax year government borrowed much more than than 1.8 million. 2016/17 will be £11bn less than forecast expected in February. Its estimate for last autumn, Mr Osborne said. The OBR 2012/13 remains at £120bn, excluding confirmed that the government was the transfer of assets from the Royal Total borrowing up to on course to eliminate the structural Mail pension fund to the government. the tax year 2016/17 current deficit by 2016/17. Its forecasts further ahead were also lowered. It now expects borrowing will be £11bn less than Avoiding a of £98bn in 2013/14 (compared with forecast last autumn, technical recession £100bn forecast in November), £75bn The UK economy shrank by 0.2% in in 2014/15 (£79bn), £52bn in 2015/16 Mr Osborne said. The the fourth quarter of last year, but Mr (£53bn) and £21bn in 2016/17 (£24bn). OBR confirmed that Osborne said the OBR expected the UK to avoid a technical recession - defined as Looking ahead the government was on two consecutive quarters of contraction - Inflation, which has been falling steadily course to eliminate the and forecast positive growth for the first over the past few months and currently three months of this year. stands at 3.4% on the Consumer Prices structural current deficit However, while slightly better Index (CPI) measure, is now expected to by 2016/17. economic growth is expected this year, fall to 2.8% this year and 1.9% in 2013.

5.
A Guide toBudget 2012 05

6.
06 A Guide to Budget 2012 The key announcements from the Chancellor’s third Budget speech Economy n igher rate tax band frozen at H Property n he Chancellor Mr Osborne said T £42,475, reducing the basic rate tax n ew stamp duty of 7% on residential N he would deliver a “strategy where band from £35,000 to £34,370 properties worth £2 million or more financial services are strong but not n Tax-free allowance band rises to n xtra funding to help construction E the only backbone to the economy” £9,205 in April 2013 firms building new homes n e cited key risks to economy as H n From April 2012 corporation tax will n esidential properties worth £2 R UK exports to eurozone and high fall to 24%, in 2014 it will be 22% million or more bought via a company oil prices n New cap on tax reliefs set at 25% will attract stamp duty of 15% n ffice of Budget Responsibility O of total income for anyone claiming (OBR) expects the British economy more than £50,000 in a year, but no Transport to avoid a technical recession significant change to pensions relief n bove-inflation full rises will only A n nflation expected to fall to 1.9% I n ge-related allowances for the 65s A come into place if oil is $75 or higher next year and over will increase from £9,940 n o changes on fuel N n rowth forecast 2% next year, 2.7% in G to £10,500 n Vehicle excise frozen for hauliers 2014, 3% in 2015/16 n Age-related allowances will eventually n old holdings have risen to £11 billion G be withdrawn once the rates align Energy with the personal allowance n 3 billion new field allowance in oil and £ The UK deficit n From 2014 taxpayers will receive gas in North Sea along with £3 billion n Deficit expected to fall – state was personal statements, detailing what they new field allowance west of Shetland borrowing 1 in 4 of every pound it spends have paid and where the money is going n arbon reduction commitment - will C n Deficit is falling and forecast to n A general anti-evasion law to come seek major savings in costs borne by reach 7.6% this year into place businesses or replace with different tax n n course for debt reduction O by 2016/17 Pensions Financial Services n overnment is borrowing at cheapest G n utomatic review of state pension A n ank levy to be increased to 0.105% B prices than at any time in 400 years age to ensure it keeps pace with from January 2013 “to ensure that n orrowing this year is to come in at B increasing life spans corporation tax cuts do not benefit £126 billion n Self-assessment forms for the banks pensioners scrapped Employment n ew single-tier state pension for N Technology n BR forecasts unemployment to O future pensioners to be set at about n UK to become “Europe’s technology peak this year at 8.7% before falling £140 and based on contributions centre” – starting with digital. each year to 6.3% by 2016/17 n 5.30 increase in state pension £ n 50 million will be made available for £ n ne million new jobs will be created O broadband in smaller cities - plans to in the next 5 years Benefits have 90% with access to super-speed n xploring idea of enterprise E n hild benefit – will only be C broadband, funding ultra-fast in 10 loans for young people to start withdrawn when someone in the UK cities own businesses household has more than £50,000 income, and will be withdrawn Military Taxation slowly – keeping some benefits n overnment spending lower than G n he additional rate of tax has been T n eople with income of £60,000 or P expected in Afghanistan - the cost of reduced from 50% to 45% from more will not receive any operations is £2.4 billion lower over April 2013 child benefit this parliament

7.
A Guide toBudget 2012 07 n Doubling rate of council tax relief for military families n here will be an extra £100 million T to improve accommodation for the armed forces families Public sector n nformation to be published on a I case for regional public sector pay. Option for government departments to move to regional pay structures for civil servants when current freeze ends The Chancellor Mr Osborne said he would deliver a “strategy where financial services are strong but not the only backbone to the economy” Business n Simpler tax system for businesses to navigate n Simplified tax system for small firms with a turnover of up to £77,000 n id-cap businesses fund increased M by 20% n nterprise finance guarantee to be E expanded n 70 million development fund to £ attract new businesses and new jobs n ax credits for television T programming, games industry and animation n nhanced capital allowances for E businesses setting up in new Scottish enterprise zones in Dundee, Irvine and Nigg - a Welsh enterprise zone to be created in Deeside n overnment support for £150 million G of tax increment financing to help councils promote development and an extra £270 million for the Growing Places fund

8.
08 A Guide to Budget 2012 Budget 2012 briefing Income tax rates Income tax rates are unchanged for the tax year 2012/13. For 2013/14, the main rates of income tax will be 20% basic rate, 40% higher rate and a lower additional rate of 45% (reduced from 50%). The additional tax rate for dividends from April 2013 will also be reduced from 42.5% to 37.5%. The trust rate of tax will be reduced from 50% to 45% and the dividend trust rate from 42.5% to 37.5%. Budget 2012 briefing Income tax personal allowance 2012/13 As announced in the 2011 Budget, the Budget 2012 income tax allowance, for those aged under 65, will increase by £630 to £8,105, with an equivalent decrease in the basic rate tax limit to £34,370. The level at which 40% tax will become payable Who can expect to be ‘better’ off following will remain unchanged in 2012/13 at £42,475. This has not increased since George Osborne’s Budget speech? 2010/11 resulting in more taxpayers being subject to higher rates of tax. Parents, low and middle earners and Parents council tax bills came out better off in Plans to end child benefit for higher- Chancellor George Osborne’s 2012 Budget. rate taxpayers have been changed. Budget Low and middle earners The Chancellor said he wanted to 2012 briefing avoid a “cliff edge” – so instead of The personal allowance – the first withdrawing it all at once, the benefit tier of earnings on which no tax is will start to be withdrawn only Income tax age-related allowances due – is to rise next year from £7,475 when an earner brings in more than From 6 April 2013 the age-related to £9,205, an increase of more than £50,000 a year, rather than at about personal allowances will be frozen. In £1,000. Millions could be more than £42,000, and it will be withdrawn addition, eligibility will be restricted to £200 a year better off. gradually – 1% of benefit for every those born on or before: £100 earned over £50,000. As a The centre piece of Budget 2012, the move result, an extra 750,000 people will n 5 April 1948 for the will cut the tax bills for anyone earning less keep some or all of this benefit; only £10,500 allowance than £100,000 and will potentially lift two those earning more than £60,000 will n 5 April 1938 for the million people out of paying tax. The tax- lose it altogether. £10,660 allowance free allowance is set rise again to £10,000 in April 2014 – saving most taxpayers Tax treatment People born on or after 6 April 1948 another £250 annually. This is a year earlier From 2014 taxpayers will receive will only be entitled to the personal than planned. a personal tax statement detailing allowance of £9,205 for 2013/14, how much of their tax bill goes to despite being aged 65. High earners pay for services such as health care The government wishes to create a The top rate of tax will be cut from and education. standard tax-free personal allowance 50p to 45p in the pound from April irrespective of age, with the effect that 2013. This is paid by people earning Council tax some pensioners will pay more tax as more than £150,000. The Chancellor 85% of local authorities will be their allowances are brought into line said that a rate of 50p had not made a freezing or reducing their council tax with those of younger taxpayers. huge difference to the tax take. next year.

9.
A Guide toBudget 2012 09 Budget 2012 Who can expect to be ‘worse’ off following George Osborne’s Budget speech? Post Budget 2012 Wealthy property buyers, drinkers, smokers and pensioners have been Mr Osborne has also introduced a 15% stamp duty land tax charge planning tips targeted in Budget 2012. on residential property held in What action should you take now? company shelters. Pensioners Income tax rates will be unchanged The Chancellor George Osborne insisted that Those earning for next year. However, the nobody would lose any money, but inflation more than £116,210 government have recognised means some pensioners will potentially see The Prudential has calculated that that the 50% rate has been a their household budgets squeezed in future individuals with an income above deterrent to inward investment years. More than four million people will be £116,210 (2012/13) will have zero and entrepreneurship as well as £83 worse off by 2014, while 360,000 people personal allowance and will lose £82 encouraged more aggressive tax aged 65 will lose £285. per year (£126 minus £44). avoidance, and acted to reduce this At the moment, around five million to 45% from April 2013. people over the age of 65 pay income Smokers You should be thinking now about tax on their pensions and other earnings. Tobacco duty increased by 5% above whether and how to defer taxable They are currently not taxed on at inflation, putting 37p on the price of a income recognition and accelerate least the first £10,500 of their income. packet of 20 cigarettes. allowances and reliefs; for example, This will now be frozen in future years, pension contributions. saving the Treasury an estimated £360 Drinkers million next year, £670 million in 2014, £1 Alcohol duty rates increased at 2% billion in 2015 and £1.25 billion in 2016. above the Retail Prices Index. There will be a new £2m residential Parents stamp duty land tax property buyers Families with one person earning There will be a new stamp duty land tax £60,000 or more a year will lose all of rate of 7% on residential rate of 7% on residential properties worth their child benefit. properties worth more than £2m, the Chancellor announced in the Budget. Previously the top rate was Motorists more than £2m, the 5%. Unlike other taxes, stamp duty land Fuel duty will rise by 3p a litre in Chancellor announced tax is paid at the applicable rate on the August despite petrol prices rising to whole price, not just the portion above the a record high, the Chancellor, George in the Budget. threshold for the highest rate. Osborne, announced in the Budget.

10.
10 A Guide to Budget 2012 Taxation and Allowances Guide 2012/13 Income tax For vans, the taxable benefit for significant private use is £3,000 (£3,000). The benefit charge for electric cars and vans is nil until 5 April 2015. Bands 2012/13 2011/12 Fuel: if fuel is provided for private use in a company car, the car The first: £0-£34,370 (£0-£35,000) 20% (20%) benefit percentage is applied to £20,200 (£18,800). £34,371-£150,000 (£35,001-£150,000) 40% (40%) Over: £150,000 (£150,000) 50% (50%) The benefit for fuel provided for a van with significant private use is £550 (£550). Dividends are taxed at 10% (10%), 32.5% (32.5%) or 42.5% (42.5%) as the top slice of total income. National insurance contributions (NIC) Other savings income, primarily bank and building society interest, is taxed at 10 up to £2,710 (£2,560). This 10% rate is not available if taxable non- Class 1 employees: savings income exceeds £2,710 (£2,560). There are special rules for trusts, and also for individuals with in- Weekly earnings Contracted in Contracted out come assessable on the remittance basis. From 6 April 2013, the 50% rate of income tax is expected to re- Up to £107 (£102) Nil (nil) Nil (nil) duce to 45%. £107.01-£146 (£102.01-£139) Nil (nil) Rebate 1.4% (1.6%) From 7 January 2013, an additional tax charge will apply to claw back £146.01-£770 (£139.01-£770) n/a 10.6% (10.4%) child benefit where one income in a household exceeds £50,000. £770.01-£817 (£770.01-£817) n/a 12% (12%) £146.01-£817 (£139.01-£817) 12% (12%) n/a Personal allowances Over £817 (over £817) 2% (2%) 2% (2%) 2012/13 2011/12 Class 1 employers: Personal £8,105 (£7,475) Income limit for personal allowance (a) £100,000 (£100,000) Weekly earnings Contracted in Contracted out Age allowance (age at end of tax year) (b): Personal: age 65-74 £10,500 (£9,940) Up to £107 (£102) Nil (nil) Nil (nil) Personal: age 75 or over £10,660 (£10,090) £107.01-£144 (£102.01-£136) Nil (nil) Rebate 3.4% (3.7%) Married couple’s (c) £7,705 (£7,295) £144.01-£770 (£136.01-£770) n/a 10.4% (10.1%) Income limit for age allowances £25,400 (£24,000) £770.01-£817 (£770.01-£817) n/a 13.8% (13.8%) Blind person’s allowance £2,100 (£1,980) £144.01-£817 (£136.01-£817) 13.8% (13.8%) n/a Over £817 (over £817) 13.8% (13.8%) 13.8% (13.8%) (a) he personal allowance is reduced by £1 for each £2 by which T income exceeds £100,000, irrespective of age. Other: (b) ge-related allowances first reduce by £1 for each £2 by which A Class 1A (employers only): 13.8% (13.8%) based on the amounts of tax- income exceeds the income limit, reducing to a minimum of the per- able benefits. sonal allowance. Such allowances can be reduced further under (a). Class 1B (employers only): 13.8% (13.8%) in respect of amounts in a (c) elief is limited to 10%, and extends to civil partnerships. At least one R PAYE settlement agreement and the income tax thereon. spouse/partner must have been born before 6 April 1935. The allow- Class 2 (flat rate for self-employed): £2.65 (£2.50) per week. ance is reduced where income exceeds the income limit, subject to Class 3 (voluntary): £13.25 (£12.60) per week. an absolute minimum of £2,960 (£2,800). In certain circumstances Class 4 (self-employed): 9% (9%) of profits between £7,605 couples may determine how the allowance may best be used. (£7,225) and £42,475 (£42,475) per annum and 2% (2%) on profits above £42,475 (£42,475). Pensions Bank levy 2012/13 2011/12 Lifetime allowance (a) £1,500,000 (£1,800,000) Annual tax on certain short-term chargeable liabilities and long- Equivalent to defined benefit pension £90,000 £90,000) ( term chargeable Maximum contribution annual allowance (b) £50,000 £50,000) ( equity and liabilities above an aggregate of £20 billion of most UK Tax on excess Marginal rate (marginal rate) based banks. Normal minimum pension age 55 55) ( Short-term liabilities 0.078% (a) Special rules can apply to individuals with larger benefits at 5 April Long-term equity and liabilities 0.039% 2006, and for those with benefits over £1,500,000 on 5 April 2012. Lower rates applied prior to 1 January 2012. Excess over the lifetime allowance may be subject to a 25% charge plus income tax on balances drawn, or 55% for lump sum benefits. From 1 January 2013, the rates will increase to 0.105% and 0.0525% (b) Unused allowances from the previous three years (by reference for short-term to a limit of £50,000 p.a.) may be carried forward, potentially liabilities and long-term equity and liabilities respectively. increasing the current year’s allowance in 2012/13 and subsequent tax years. Insurance premium tax Company cars – annual benefits Standard rate 6% Higher rate 20% The annual benefit is a percentage of list price, with the percentage de- pendent on the level of CO2 emissions. The minimum benefit is 5% for Capital gains tax emissions of 75g/km or less. For emissions of over 75 and up to 99g/ 2012/13 2011/12 km, the rate is 10%. For emissions of 100-104g/km, the rate is 11% and For standard rate taxpayers 18% (18%) increases by 1% for each additional full 5g/km up to a maximum charge For trustees and higher 28% (28%) of 35% for emissions of 220g/km or more. Emission levels are rounded /additional rate taxpayers down to the nearest multiple of five. List price includes certain accesso- Annual exempt amount – individuals £10,600 (£10,600) ries, but is reduced for capital contributions of up to £5,000. Annual exempt amount – trusts £5,300 (£5,300) There is a diesel supplement of 3% for all bands, subject to a maxi- Entrepreneurs’ relief lifetime limit £10,000,000 £10,000,000) mum charge of 35%. Entrepreneurs’ rate 10% (10%)

11.
A Guide toBudget 2012 11 Inheritance tax Stamp duties Nil rate band: up to £325,000 (£325,000) – 0% (0%) 2012/13 2011/12 Over £325,000 (£325,000) – 40% (40%). Stamp duty land tax on non-residential land and buildings (a) (b): £0-£150,000 0% (0%) Reduced charge on lifetime gifts within seven years of death applies. £150,001-£250,000 (£150,001-£250,000) 1% (1%) A surviving spouse or civil partner may claim the unused propor- £250,001-£500,000 (£250,001-£500,000) 3% (3%) tion of an earlier deceased spouse’s or civil partner’s nil rate band Over £500,000 (over £500,000) 4% (4%) up to the current nil rate band. Stamp duty land tax on residential land and buildings (a) (b) (c): £0-£125,000 (£0-£125,000) (d) (e) 0% (0%) From 6 April 2012, a reduced rate of 36% applies when 10% or £125,001-£250,000 1% (1%) more of a net estate is left to charity. (£125,001-£250,000) (d) (e) £250,001-£500,000 (£250,001-£500,000) 3% (3%) Tax-efficient investments £500,001-£1,000,000 (£500,001-£1m) 4% (4%) £1,000,001-£2,000,000 (over £1,000,000) 5% (5%) 2012/13 2011/12 Over £2,000,000 (f) 7% (5%) ISA investment limit £11,280 (£10,680) Cash ISA maximum investment £5,640 (£5,340) (a) ll figures are calculated inclusive of any VAT. Rates apply to A Junior ISA investment limit cash £3,600 (£3,600) the full amount. or shares (a) (b) n leases, the rate is (broadly) 1% of the discounted rental O (a) From 1 November 2011, for children aged under 18 without a values under the lease over the £150,000/£125,000 limit. Child Trust Fund. (c) For new zero carbon homes, including flats, the 0% threshold Venture capital trusts (VCTs): income tax relief at up to 30% on extends to £500,000 until 30 September 2012; for such prop- investment up to £200,000. erties over £500,000 there is a £15,000 reduction. (d) For residential property in disadvantaged areas, the 0% threshold Enterprise investment scheme (EIS): income tax relief at up to 30% extends to £150,000. on qualifying share subscription between £500 and £1,000,000 (e) he 0% threshold extended to £250,000 for first time buyers T (£500,000). only for purchases where the date of completion was between Seed enterprise investment scheme (SEIS): income tax relief of 25 March 2010 and 24 March 2012. 50% on investment up to £100,000, together with rollover of (f) ate applies from 22 March 2012. Where residential property R gains made in 2012-13 into the subscription. over £2 million is purchased by a company (or similar entity), a 15% rate applies. Corporation tax Stamp duty – shares and securities 0.5% (0.5%) Stamp duty reserve tax 0.5%/1.5% (0.5%/1.5%) From 1 April 2012 2011 Small profits rate £0-£300,000 20% (£0-£300,000 20%) Marginal rate £300,001-£1,500,000 25% (£300,001-£1,500,000 27.5%) Value added tax Main rate (a) Over £1,500,000 24% (Over £1,500,000 26%) (a) he main rate will further decrease by 1% in each year until financial T Standard rate 20% year 2014 when the main rate will be 22%. Lower rate 5% Zero rate 0% Capital allowances Registration threshold (changes from 1 April 2012): taxable supplies at the end of any month exceed £77,000 (£73,000) in the Expenditure on: 2012/13 past 12 months, or will at any time exceed £77,000 (£73,000) in 2011/12 the next 30 days. These thresholds also apply for supplies from Plant and machinery: (a) 18% (20%) other EU Member States. Plant and machinery in enterprise zones 100% (n/a) Motor cars on or after April 2009 – CO2 emissions 110g/km 100% (100%) Air passenger duty 110g/km-160g/km (a) 18% (20%) 160g/km (a) 8% (10%) Air passenger duty is a departure tax levied on air travel. Rates Motor cars pre April 2009 (a) (b) 18% (20%) per passenger: New and unused zero emission goods vehicles 100% (100%) Reduced rate Standard rate Long life assets/features in buildings (a) 8% (10%) From 1 April 2012 (a) Patent rights and know-how (a) (c) 25% (25%) Band A (0-2,000 miles from London) (b) £13 (£12) £26 (£24) Mines, oil wells, mineral rights (a) (d) 25% (25%) Band B (2,001-4,000 miles from London) £65 (£60) £130 (£120) Research and development 100% (100%) Band C (4,001-6,000 miles from London) £81 (£75) £162 (£150) Energy-saving and water efficient machinery 100% (100%) Band D (over 6,000 miles from London) £92 (£85) £184 (£170) Renovation of premises (disadvantaged areas) 100% (100%) (a) Flights from airports in the Scottish Highlands and Islands are exempt. There is a 100% annual investment allowance on the first (b) Includes all long haul flights from Northern Ireland. £25,000 (£100,000), per group of companies or related entities, of capital expenditure Climate change levy on plant and machinery including long life assets and integral features, but Electricity 0.509p (0.485p) per kWh Gas 0.177p (0.169p) excluding cars. per kWh (a) hese allowances are given on a reducing balance basis. T Coal, lignite, coke and semi-coke 1.387p (1.321p) per kg Liquid (b) Subject to a maximum allowance of £3,000 p.a. per vehicle. petroleum gas 1.137p (1.083p) per kg (c) For expenditure from April 2002 accounting write downs Climate change levy is a single stage tax on supplies of various (and not capital allowances) are allowable deductions for tax. fuels to industrial and commercial consumers. (d) Acquisition of mineral deposits and rights qualify for 10% p.a.

12.
12 A Guide to Budget 2012 Current 50p top tax rate will be cut to 45p £16 billion of income was deliberately shifted into the previous tax year – at a cost to the taxpayer of £1 billion The Chancellor George Osborne tax year – at a cost to the taxpayer officials refused to say if the 45p band confirmed during his Budget 2012 of £1 billion, something that the for those earning over £150,000 will be speech that the current 50p top tax previous government’s figures made no merely ‘temporary. ’ rate will be cut to 45p from April 2013. allowance for.’ Those earning £150,000 or more have Mr Osborne also argued that the been subject to the 50% rate since April increase to 50p in 2010 raised about a Mr Osborne said that 2010, when it was brought in by the third of the £3 billion the government the 50p tax rate would Labour government. hoped it would raise, and cutting it to 45p would only cost the government only be justified if it Massive distortions £100 million. raised a significant Mr Osborne said that the 50p tax rate would only be justified if it raised Scrapped altogether amount of money but a significant amount of money but There are currently around 300,000 evidence from HM evidence from HM Revenue and Customs people in the UK who earn £150,000 (HMRC) showed that the rate caused or more; of those 14,000 earn over £1 Revenue and Customs ‘massive distortions.’ million a year. (HMRC) showed He said: ‘HMRC found that an It was widely predicted the tax would astonishing £16 billion of income was be reduced from 50p to 45p rather than that the rate caused deliberately shifted into the previous being scrapped altogether but senior ‘massive distortions.’

13.
A Guide toBudget 2012 13 Budget 2012 briefing Inheritance Tax matters The government will consult on legislation to increase the Inheritance Tax (IHT) exempt amount that a UK domiciled individual can transfer to their non UK domiciled spouse or civil partner. The government similarly proposes to allow individuals who are domiciled outside the UK and who have a UK domiciled spouse or civil partner to elect to be treated Budget as domiciled in the UK for the purposes of IHT. Legislation will be in Finance Bill 2013. 2012 briefing Offshore trusts Legislation will be introduced in Finance Bill 2012 to amend the excluded property and settled property provisions in order to close Tax evasion and aggressive tax evasion an avoidance scheme involving the acquisition of interests in The Chancellor said he would implement tax avoidance schemes. The government offshore trusts by UK-domiciled a general anti-abuse rule from April 2013 will consult with a view to bringing forward individuals. The changes will ensure to tackle abuses by business seeking legislation in the Finance Bill 2013. that any reduction in the value of to divert profits to low-tax havens or a person’s estate as a result of the devise schemes to evade taxes. He said arrangements is charged to IHT. the Treasury would spend the next year The Treasury will The changes will largely consulting interested parties before follow the Aaronson replicate the tax treatment that deciding on the fine detail. a UK-domiciled individual using Changes to the rules on tax paid by UK recommendations by such a scheme would incur if the companies will allow them to cut the amount implementing assets within the offshore trust they pay on profits made by their foreign had instead been transferred to a subsidiaries. The aim is to allow firms to a GAAR targeting UK trust. This measure took effect pay local taxes without a surcharge by the ‘artificial and abusive’ tax from 21 March 2012. Treasury to bring the corporation tax rate up to UK levels. avoidance schemes. The Charitable legacies – Mr Osborne said: ‘I regard tax government will consult reduced rate of IHT evasion and aggressive tax evasion as Legislation will be introduced in morally repugnant.’ with a view to bringing Finance Bill 2012 which will apply a The Treasury will follow the Aaronson forward legislation in the reduced rate of IHT to estates where recommendations by implementing a minimum of 10% of the estate is a GAAR targeting ‘artificial and abusive’ Finance Bill 2013. left to charity.

14.
14 A Guide to Budget 2012 “Simplifying” the tax system and spreading tax relief across everyone Extra allowance will gradually reduce for pensioners, whose taxable income is between £24,000 and about £29,000 The amount of income that is not taxed pensioner earning more than £29,000. Within the total, 360,000 individuals will be frozen for those aged over There is also a gradual withdrawal aged 65 lose an average £285. Some 65, affecting the financial plans for of the basic personal allowance for 230,000 people will be brought those approaching retirement. From everyone with income above £100,000, into income tax. So this will save the April 2013, those reaching age 65 will regardless of age. government £360m in the year it is no longer receive a higher personal introduced, rising to £1.25bn a year by allowance than people of working age. The way tax is calculated 2016/17. This will save the government £1bn In a major shift in the way tax is by 2015, Budget documents have calculated, already dubbed a “granny Pension age revealed. The government said it tax” on Twitter, Chancellor George Although the tax-free income allowance wanted to “simplify” the tax system Osborne has said that income tax is rising for the under-65s, HMRC has and spread tax relief across everyone, personal allowances will change in the confirmed that 300,000 will be drawn regardless of age. following way: into higher rate tax from 2013/14. n he under 65s’ personal allowance T The change comes as a result of the In brief will increase to £9,205 in April 2013 higher rate threshold being reduced n he amount of income that is tax- T - that relates to people born after 5 from £42,475 to £41,450 - the point at free - the personal allowance - is April 1948 which people start paying 40% tax on greater at present for most people n personal allowance of £10,500 A their income. aged over 65 will be restricted to most people Meanwhile, Mr Osborne confirmed n he system will be changed so T born after 5 April 1938, but before that he would set up an “automatic eventually, everyone will have the 6 April 1948 review” of the state pension age to same personal allowance n he personal allowance of most T make sure it keeps on rising if people n Some 4.41 million people will be people born before 6 April 1938 keep on living even longer, which means worse off in real terms in 2013/14, will be £10,660 to 68 and beyond. The state pension losing £83 on average age is already scheduled to rise to 67, n ithin that, 360,000 people aged W No entitlement to for both men and women, by 2026. 65 lose an average of £285 the higher personal allowance This will save the Source: HM Revenue and The change means that as people turn Customs (HMRC) 65, they will not be entitled to the government £1bn by higher personal allowance set aside for 2015, Budget documents For those aged between 65 and 74, most pensioners. the personal allowance, the amount of Instead, they will receive the same have revealed. The income that is tax-free, has been set at as everyone else. As time goes on, government said it £10,500 from April. For those aged 75 more and more people will fall into and over, the allowance will be £10,660. this group. As a result, in 2013/14, wanted to “simplify” the This extra allowance gradually some 4.41 million people will be worse tax system and spread reduces for pensioners, whose taxable off in real terms with an average loss income is between £24,000 and of £83, HM Revenue and Customs tax relief across everyone, about £29,000. It disappears for any (HMRC) said. regardless of age.

15.
A Guide toBudget 2012 15 The amount of income that is not taxed will be frozen for those aged over 65, affecting the financial plans for those approaching retirement. From April 2013, those reaching age 65 will no longer receive a higher personal allowance than people of working age.

16.
16 A Guide to Budget 2012 Combining the two state pensions into one simplified pension Pensioners will receive a flat-rate state pension, initially it is estimated that it will be worth about £140 a week The Chancellor Mr Osborne by a single scheme, will cost no more The flat rate pension confirmed during his Budget 2012 than the existing state pension system. speech a pledge to combine the two will only apply to state pensions into one simplified Combined pension those retiring after pension, as well as increasing the payments implementation. state pension age automatically in This means that while those on low line with rises in longevity. incomes who have made small or Pensioners already The full basic state pension is no contributions to S2P will benefit receiving the state currently £102.15 a week, rising to from a higher pension than they pension will not move £107.45 from April this year. Pensioners could currently expect, people who will receive a flat-rate state pension, earn higher salaries may lose out. onto the new scheme. initially it is estimated that it will be The current full basic state pension is worth about £140 a week for those £102.15 a week (rising to £107.45 from state pension will not move onto the with a 30-year national insurance April 2012), but those at the top end of new scheme. record, from 2016. the salary scale can expect up to £180 Mr Osborne also announced that an a week in combined pension payments. automatic review of the state pension Replaced by age (SPA) would be introduced to a single scheme Automatic review of the take account of increases in longevity. The government says the long-awaited state pension age Details of how this will be done will change, which will see the current basic The flat rate pension will only apply be published alongside the Office state pension and second state pension to those retiring after implementation. for Budget Responsibility fiscal (S2P, formerly known as Serps) replaced Pensioners already receiving the sustainability report.

17.
A Guide toBudget 2012 17 Government plans to withdraw child benefit from parents who earn higher levels of income All sections of society must make a contribution to dealing with the deficit Under changes announced by the Perceived problem Entitlement under the Chancellor George Osborne in his The government had planned to original proposals Budget speech, households with one remove the benefit from households Some 7.8 million families receive child person earning more than £50,000 a in which someone earns more than benefit, of which 1.2 million would year will lose some of their child benefit. £42,475 in January 2013. have lost their entitlement under Mr Osborne said it was important The perceived problem was an anomaly the original proposals. The number that “all sections of society must that a family with a single earner taking affected will be lower under the make a contribution to dealing with home more than £42,475 would lose child renewed plans. the deficit” and cautioned that the benefit, but a couple each earning slightly Three million taxpayers earning over welfare budget needed to be cut less than this could take home £80,000 £50,000 will be sent letters in the back because social security would and keep the benefit. autumn asking if they or anyone in consume one-third of public spending The other issue of debate was the their household receives child benefit if left unchecked. “cliff-edge”. That meant someone - in order for some to be clawed back earning £42,475 or below would through tax from January 2013. Reducing the deficit receive the full child benefit. As soon The income tax charge could be Until now, child benefit has been as they earned £42,476, they would levied from monthly pay cheques, via universally paid to families of all lose every penny of the child benefit. people’s personal tax codes. Otherwise, backgrounds. But the government says The benefit will fall by 1% for every the first tax bills for child benefit people on “higher incomes” should £100 earned over £50,000. That means will have to be settled by the end of “contribute more” in order to reduce those earning more than £60,000 will January 2014. the deficit. lose the entirety of the benefit. Government plans to withdraw child benefit from parents who earn higher levels of income have been altered. Chancellor George Osborne said that the benefit would only be withdrawn entirely from those where one partner earns more than £60,000 a year. The benefit will be withdrawn gradually from those where one parent earns more than £50,000. Child benefit totals £20.30 a week for the first child, and then £13.40 for each subsequent child. There is no limit to the number of children that can be claimed for. So, for a family with two children, one parent would receive £33.70 per week or £1,752.40 per year. The equivalent in terms of earnings, taking income tax into account, would make it worth £2,190.50 for a basic rate taxpayer and £2,920.67 for a higher rate taxpayer.

18.
18 A Guide to Budget 2012 Budget 2012 briefing Pension contributions for spouses or family members The Chancellor announced during his Budget Speech that “from April 2013 pension contributions Budget 2012 briefing paid into spouses or family members’ registered pension schemes cannot be used to obtain any tax or National Insurance Contribution advantages. “This addresses the recent Enterprise Investment Schemes (EIS) and growing practice where Venture Capital Trusts (VCTs) employees who have reached their £50,000 annual cap are As previously announced in Budget 2011, and companies raising money under these diverting contributions from their the attraction of Enterprise Investment schemes will be affected. employer into their spouses or Schemes (EIS) and Venture Capital The increase in the annual amount that family member’s pension funds to Trusts (VCTs) was enhanced through an individual can invest under EIS will apply obtain tax relief. simplifications to the rules and increased with effect from 6 April 2012. It also helps to utilise any thresholds. This included removing some available spouse’s pension relief. restrictions on qualifying shares and types The changes to EIS will Some employers have been implementing this as part of of investor. In addition, the EIS annual investment limit for individuals will be apply to shares issued on flexible benefits packages and increased to £1 million from 6 April 2012. or after 6 April 2012. The it would appear that HMRC are change to the investment concerned that this practice may Minimum subscription become more widespread.” Following consultation, the £500 minimum limit by a VCT in a single subscription for EIS will be removed. The company will apply to definition of shares which qualify for relief shares issued on or after Budget will be widened and the rules relating 1 April 2012. 2012 briefing to whether an investor in a company is connected will be relaxed. For VCTs, the £1 million limit on Shares issued on Income tax rules on interest investment by a VCT in a single company or after 6 April 2012 will be removed (except for companies in a The changes to EIS will apply to shares Legislation surrounding the taxation partnership or joint venture). issued on or after 6 April 2012. The change of interest, and the deduction of to the investment limit by a VCT in a single tax at source, will be subject to a Thresholds increased company will apply to shares issued on or government consultation with a The thresholds for the size of a qualifying after 1 April 2012. view to amended legislation being company for both EIS and VCT will be The increases to the company size limits introduced from April 2013. increased and the maximum annual amount and the annual investment amount that This measure is particularly aimed that can be invested in an individual a company may receive for both EIS and at pensioners who may not be company under all the venture capital VCT will have effect for investee company liable to income tax on their savings schemes will be increased to £5 million. shares issued on or after 6 April 2012. This is depending on their total income. Individuals investing into these schemes subject to state aid approval.

19.
A Guide toBudget 2012 19 Budget Budget 2012 briefing 2012 briefing Enterprise Management Incentives (EMI) Anti avoidance: Life insurance policies The limit set for the share option Senior employees of small and medium scheme focused on small and sized businesses will be affected which Gains from life insurance policies, medium sized businesses, Enterprise issue EMI share options. life annuity contracts and capital Management Incentives (EMI), is set to The government needs state aid redemption policies are taxed as increase. Currently, the value of qualifying approval to implement this measure, but income. The charge arises on the options which can be issued to any one plans to push through the changes by occurrence of a ‘chargeable event employee is £120,000. This limit will be Statutory Instrument as soon as possible gain’ such as the maturity of a policy. increased to £250,000. The restriction, given this constraint. Changes were announced to which stops further options from being the rules in calculating gains from granted until a period of three years has certain policies and contracts. passed following the limit being reached, is to remain. The overall company limit of Post Budget 2012 The changes confirm that gains, which are subject to income tax, options of £3 million is also set to remain. EMI reform proposals planning tips are not reduced by any untaxed gains earlier in the life of the policy or contract. The government also proposes to reform What action should you take now? In addition, income gains are EMI in Finance Act 2013 allowing gains not reduced by the use of certain arising from 6 April 2012 on the sale of Companies with offshore interests cluster arrangements. In addition, shares acquired through an EMI scheme should review their structures to the government has announced a to be eligible for Entrepreneurs’ Relief. minimise the impact and maximise consultation on reform to the time This will reduce the effective rate of the opportunities of the CFC and apportionment of gains when the CGT suffered on any gains to 10%. The Patent Box changes (especially finance taxpayer is not resident in the UK government will consult on extending the company exemptions and taxing for a period. EMI option scheme to academics, who do intellectual property at 10%). UK resident individuals will be not always meet the qualifying criteria. affected who own life insurance policies, life annuity contracts and capital redemption policies, where there have been gains earlier in the life of the policy which were not subject to income tax, or certain cluster policy arrangements which defer income tax until the final policy in the cluster comes to an end. The measures have taken immediate effect.

20.
20 A Guide to Budget 2012 Post Budget 2012 planning tips A Budget What action should you take now? Business owners should start to give for business careful thought to how to maximise pension contributions at the highest rate (50%) and how and when these should be funded by their companies, especially given that effective dividend rates will reduce from 36.1% Changes that could greatly affect the UK’s to 30.6% from 6th April 2013. small and medium-sized enterprises Tax simplifications Corporation tax Youth enterprise loans From April 2013, companies with sales The basic rate will now fall to 24% Under a one-year pilot scheme to be of up to £77,000 per year will be from April 2102, down from the current launched by March 2013, up to 7,000 allowed to change their accounting 26%. This change does not affect young people aged between 18 and from the established accrual method small firms, as those with profits not 24 will be able to apply to borrow to a cash basis. What this means is exceeding £300,000 a year already between £5,000 and £10,000 to back that firms will only have to pay tax only have to pay 20%. Future cuts will their business idea. on the amount of money they have see the main rate of corporation tax actually received, rather than total drop to 23 per cent in April 2013 and Business rates orders, as under the current accrual- 22 per cent in April 2014. Business rates will go up by 5.6% based system. from April 2012, as had previously If successful, the Treasury will then Patent box been announced. consider expanding the change to Small firms which have patented a firms with sales of up to £150,000 per product will be able to benefit from Fuel duty year, which it estimates would mean the so-called Patent Box. Coming into The Budget offered no reprieve for small more than three million firms being effect from April 2013, the Patent Box firms struggling with the high price of able to benefit. is a reduced level of corporation tax on petrol and diesel. Instead, fuel duty will George Osborne also confirmed profits attributed to patents and similar continue to go up by 3p in August. that the government is to move types of intellectual property. ahead with plans to integrate income As confirmed by the chancellor, New loan scheme tax and national insurance, first it will introduce a lower rate of 10%. The introduction of a new bank lending announced in last year’s Budget, so Sectors likely to benefit most scheme - was announced a day before firms do not have to run two different include pharmaceuticals and the the Budget. Under the £20bn National payroll tax systems. software industry. Loan Guarantee Scheme (NLGS),

21.
A Guide toBudget 2012 21 Budget Post Budget 2012 2012 briefing Small firms which have Changes to Registered Overseas planning tips patented a product will Pension Scheme rules members What action should you take now? be able to benefit from The government will introduce The individual limit on qualifying the so-called Patent changes to tighten up the tests to Enterprise Management Incentives be a Qualifying Registered Overseas (EMI) options will increase from Box. Coming into effect Pension Scheme (QROPS). It will £120,000 to £250,000. This makes also make various amendments to EMI schemes even more attractive from April 2013, the the reporting requirements. to businesses wishing to retain Patent Box is a reduced People who will be affected and incentivise employees in a tax are members of a QROPS or who efficient manner. level of corporation tax wish to transfer their pensions into Potentially of greater benefit is on profits attributed to a QROPS, and QROPS scheme the announcement that gains on EMI administrators. The changes come shares will qualify for entrepreneur’s patents and similar types into effect from 6 April 2012, relief at 10% tax for exercises post 6 although there are some transitional April 2012. of intellectual property. rules. Individuals holding EMI options should not exercise options before 6 April 2012 without taking advice first. Budget SMEs will be able to access loans with 2012 briefing interest rates one percentage point lower What action should you than those available outside the initiative. take now? Barclays, Santander, Lloyds and Royal Bank of Scotland have so far signed up, and firms Business owners should continue to with an annual turnover of up to £50m will review their business structure to be able to participate. take advantage of the difference in The discounted loans are being made income tax and corporate tax rates. available because the government is The potential benefits of maximising to guarantee £20bn of the banks’ own the arbitrage between the two borrowing, thereby allowing the lenders will be greatest in 2012/2013; for to borrow more cheaply than they example income tax 50% versus normally do. corporate tax 24%). There are a number of solutions which can help deliver these tax benefits. Corporation taX RATES Rate 2011 2012 2013 Small Profits Rate 20% 20% Small Profits Rate can be £300,000 £300,000 claimed by qualifying companies with profits at a rate not exceeding Marginal Relief Lower Limit £300,000 £300,000 Marginal Relief Upper Limit £1,500,000 £1,500,000 Standard fraction 3/200 1/100 Main rate of Corporation Tax 26% 24% 23% Special rate for unit trusts and 20% 20% open-ended investment companies

22.
Content of thearticles featured in ‘A Guide to Budget 2012’ is for your general information and use only and is not intended to address your particular requirements. They should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions. Published by Goldmine Media Limited, Prudence Place, Luton, Bedfordshire, LU2 9PE Articles are copyright protected by Goldmine Media Limited 2011. Unauthorised duplication or distribution is strictly forbidden.

23.
A Guide to BUDGET 2012 “Creatinga stable economy, a fairer, more efficient and simpler tax system, and further reforms to support growth.” - Chancellor George Osborne

24.
02 A Guide to Budget 2012 A Guide to Budget 2012 What the Chancellor had to say Welcome to ‘A Guide to Budget 2012’. Inside we predicted, Mr Osborne said. “No Chancellor can look at many of the pre-announcements made in justify a tax rate that damages our economy Budget 2011 and the proposed measures that will and raises next to nothing.” take effect from 6 April 2013. He also said a further £1,100 rise in the The Chancellor of the Exchequer, George threshold at which income tax is paid from next Osborne, presented his third Budget speech to year would benefit “every working person on low Parliament on, 21 March 2012. It maintained the or middle incomes” and amounted to an extra government’s strategy to reduce the deficit, £220 a year each - or £170 after inflation. contained far-reaching tax reforms and support Biggest cash increase in the state pension ever for growth and reward for work. Allowances are currently more generous for the The Chancellor set out the actions the over-65s - at £10,500 up to age 74 and £10,660 government will take in three areas - creating after that. But they will be frozen, and stopped a stable economy, a fairer, more efficient and for anyone turning 65 after 5 April 2013. Mr simpler tax system and further reforms to Osborne said it would ‘simplify’ allowances and support growth. no pensioner would lose out “in cash terms”. He pointed to April’s “biggest cash increase in the Cutting the tax rate state pension ever” of £5.30 a week. Mr Osborne announced he would be cutting the HM Revenue and Customs figures also show tax rate for earnings over £150,000, saying in that 300,000 people will be drawn into paying his Budget it raised “next to nothing.” He is also the 40% higher rate tax from 2013/14 because of going to raise the threshold at which people start a reduction in the threshold to £41,450. paying tax to £9,205 which it is estimated will A new 7% rate of stamp duty land tax would leave millions of working people over £200 better be charged on residential properties worth more off, but 4.4 million pensioners will be worse off than £2m - and anyone trying to buy a £2m home next year when age-related tax allowances are through a company would face a punitive 15% frozen and come to an end. stamp duty rate. Presenting his Budget speech, the Chancellor said: “This Budget supports working families and Avoiding a “cliff edge” effect helps those looking for work. Child benefit had been due to be removed from all families with at least one parent paying the Unashamedly backing business higher, 40% rate, of income tax - about £43,000 - “It unashamedly backs business. And it is on the from January 2013. side of aspiration: those who want to do better But Mr Osborne said he wanted to avoid a “cliff for themselves and for their families.” edge” effect - so it would now only be withdrawn He defended the decision to cut the top rate when someone in a household earned more than of tax by saying five times as much would be £50,000, at a rate of 1% of the benefit for every £100 raised from the wealthiest by other tax and anti- up until £60,000, when it would be cut entirely. avoidance measures being brought in. He said the rate was the highest among To discuss how the Budget 2012 G20 countries and damaged competitiveness. changes could have impacted A report into the highest rate had found it on your financial plans, please had raised just a third of the £3bn initially contact us for further information.

25.
A Guide toBudget 2012 03 Contents 04 Economy and public finances Unwavering commitment to deal with Britain’s 16 Combining the two state pensions into one simplified pension record debt Pensioners will receive a flat-rate state pension, initially it is estimated that it will be worth about 06 Budget 2012 at a glance The key announcements from the Chancellor’s £140 a week third Budget speech 17 Government plans to withdraw child benefit from parents who 08 Budget 2012 briefing Income tax rates earn higher levels of income “All sections of society must make a contribution to dealing with the deficit” 08 Budget 2012 briefing Income tax personal allowance 2012/13 18 Budget 2012 briefing Pension contributions for spouses or family members 08 Budget 2012 briefing Income tax age-related allowances 18 Budget 2012 briefing Income tax rules on interest 08 Budget 2012 Who can expect to be ‘better’ off following 18 Budget 2012 briefing George Osborne’s Budget speech? Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) 09 Budget 2012 Who can expect to be ‘worse’ off following George Osborne’s Budget speech? 19 Budget 2012 briefing Enterprise Management Incentives (EMI) 10 What the numbers mean to you 2012/13 Taxation and Allowances guide 19 Budget 2012 briefing Anti avoidance: Life insurance policies 12 Current 50p top tax rate will be cut to 45p 20 A Budget for business Changes that could greatly affect the UK’s small £16 billion of income was deliberately shifted into and medium-sized enterprises the previous tax year – at a cost to the taxpayer of £1 billion 21 Budget 2012 briefing Changes to Registered Overseas Pension Scheme 13 Budget 2012 briefing Tax evasion and aggressive tax evasion rules members 13 Budget 2012 briefing Inheritance Tax matters 14 “Simplifying” the tax system and spreading tax relief across everyone Extra allowance will gradually reduce for pensioners, whose taxable income is between £24,000 and about £29,000

26.
04 A Guide to Budget 2012 Economy and public finances Unwavering commitment to deal with Britain’s record debt The UK economy will grow more the growth forecast for 2013 was revised Unemployment expectations were quickly this year than previously down. The OBR now projects 2% growth unchanged, with a jobless rate of forecast, Chancellor George Osborne in 2013, down from the 2.1% it estimated 8.7% forecast for this year, 8.6% in announced during his Budget speech. in November. 2013, 8.0% in 2014 and 7.2% in 2015. The independent Office for Budget In 2014 the economy is expected to The unemployment rate for 2016 was Responsibility (OBR) forecasts growth grow by 2.7%, while growth of 3% is revised up slightly from 6.2% to 6.3%. of 0.8% in 2012, compared with its projected in both 2015 and 2016, in line The OBR forecast one million more autumn estimate of 0.7%. with the previous forecast. jobs in the economy over the next five The OBR also now estimates that Mr Osborne said that the crisis in the years and it revised its estimate for the the government will borrow £1bn less eurozone remained a major risk to the claimant count - the number of people than previously forecast this year. Mr OBR’s forecast, while another risk came claiming Jobseeker’s Allowance - Osborne said his Budget signalled the from a “further spike in oil prices”. down by about 100,000 for each of government’s “unwavering commitment Earlier, figures from the Office for the next four years. It is now expected to deal with Britain’s record debt.” National Statistics showed that the to peak at 1.67 million this year, rather Total borrowing up to the tax year government borrowed much more than than 1.8 million. 2016/17 will be £11bn less than forecast expected in February. Its estimate for last autumn, Mr Osborne said. The OBR 2012/13 remains at £120bn, excluding confirmed that the government was the transfer of assets from the Royal Total borrowing up to on course to eliminate the structural Mail pension fund to the government. the tax year 2016/17 current deficit by 2016/17. Its forecasts further ahead were also lowered. It now expects borrowing will be £11bn less than Avoiding a of £98bn in 2013/14 (compared with forecast last autumn, technical recession £100bn forecast in November), £75bn The UK economy shrank by 0.2% in in 2014/15 (£79bn), £52bn in 2015/16 Mr Osborne said. The the fourth quarter of last year, but Mr (£53bn) and £21bn in 2016/17 (£24bn). OBR confirmed that Osborne said the OBR expected the UK to avoid a technical recession - defined as Looking ahead the government was on two consecutive quarters of contraction - Inflation, which has been falling steadily course to eliminate the and forecast positive growth for the first over the past few months and currently three months of this year. stands at 3.4% on the Consumer Prices structural current deficit However, while slightly better Index (CPI) measure, is now expected to by 2016/17. economic growth is expected this year, fall to 2.8% this year and 1.9% in 2013.

27.
A Guide toBudget 2012 05

28.
06 A Guide to Budget 2012 The key announcements from the Chancellor’s third Budget speech Economy n igher rate tax band frozen at H Property n he Chancellor Mr Osborne said T £42,475, reducing the basic rate tax n ew stamp duty of 7% on residential N he would deliver a “strategy where band from £35,000 to £34,370 properties worth £2 million or more financial services are strong but not n Tax-free allowance band rises to n xtra funding to help construction E the only backbone to the economy” £9,205 in April 2013 firms building new homes n e cited key risks to economy as H n From April 2012 corporation tax will n esidential properties worth £2 R UK exports to eurozone and high fall to 24%, in 2014 it will be 22% million or more bought via a company oil prices n New cap on tax reliefs set at 25% will attract stamp duty of 15% n ffice of Budget Responsibility O of total income for anyone claiming (OBR) expects the British economy more than £50,000 in a year, but no Transport to avoid a technical recession significant change to pensions relief n bove-inflation full rises will only A n nflation expected to fall to 1.9% I n ge-related allowances for the 65s A come into place if oil is $75 or higher next year and over will increase from £9,940 n o changes on fuel N n rowth forecast 2% next year, 2.7% in G to £10,500 n Vehicle excise frozen for hauliers 2014, 3% in 2015/16 n Age-related allowances will eventually n old holdings have risen to £11 billion G be withdrawn once the rates align Energy with the personal allowance n 3 billion new field allowance in oil and £ The UK deficit n From 2014 taxpayers will receive gas in North Sea along with £3 billion n Deficit expected to fall – state was personal statements, detailing what they new field allowance west of Shetland borrowing 1 in 4 of every pound it spends have paid and where the money is going n arbon reduction commitment - will C n Deficit is falling and forecast to n A general anti-evasion law to come seek major savings in costs borne by reach 7.6% this year into place businesses or replace with different tax n n course for debt reduction O by 2016/17 Pensions Financial Services n overnment is borrowing at cheapest G n utomatic review of state pension A n ank levy to be increased to 0.105% B prices than at any time in 400 years age to ensure it keeps pace with from January 2013 “to ensure that n orrowing this year is to come in at B increasing life spans corporation tax cuts do not benefit £126 billion n Self-assessment forms for the banks pensioners scrapped Employment n ew single-tier state pension for N Technology n BR forecasts unemployment to O future pensioners to be set at about n UK to become “Europe’s technology peak this year at 8.7% before falling £140 and based on contributions centre” – starting with digital. each year to 6.3% by 2016/17 n 5.30 increase in state pension £ n 50 million will be made available for £ n ne million new jobs will be created O broadband in smaller cities - plans to in the next 5 years Benefits have 90% with access to super-speed n xploring idea of enterprise E n hild benefit – will only be C broadband, funding ultra-fast in 10 loans for young people to start withdrawn when someone in the UK cities own businesses household has more than £50,000 income, and will be withdrawn Military Taxation slowly – keeping some benefits n overnment spending lower than G n he additional rate of tax has been T n eople with income of £60,000 or P expected in Afghanistan - the cost of reduced from 50% to 45% from more will not receive any operations is £2.4 billion lower over April 2013 child benefit this parliament

29.
A Guide toBudget 2012 07 n Doubling rate of council tax relief for military families n here will be an extra £100 million T to improve accommodation for the armed forces families Public sector n nformation to be published on a I case for regional public sector pay. Option for government departments to move to regional pay structures for civil servants when current freeze ends The Chancellor Mr Osborne said he would deliver a “strategy where financial services are strong but not the only backbone to the economy” Business n Simpler tax system for businesses to navigate n Simplified tax system for small firms with a turnover of up to £77,000 n id-cap businesses fund increased M by 20% n nterprise finance guarantee to be E expanded n 70 million development fund to £ attract new businesses and new jobs n ax credits for television T programming, games industry and animation n nhanced capital allowances for E businesses setting up in new Scottish enterprise zones in Dundee, Irvine and Nigg - a Welsh enterprise zone to be created in Deeside n overnment support for £150 million G of tax increment financing to help councils promote development and an extra £270 million for the Growing Places fund

30.
08 A Guide to Budget 2012 Budget 2012 briefing Income tax rates Income tax rates are unchanged for the tax year 2012/13. For 2013/14, the main rates of income tax will be 20% basic rate, 40% higher rate and a lower additional rate of 45% (reduced from 50%). The additional tax rate for dividends from April 2013 will also be reduced from 42.5% to 37.5%. The trust rate of tax will be reduced from 50% to 45% and the dividend trust rate from 42.5% to 37.5%. Budget 2012 briefing Income tax personal allowance 2012/13 As announced in the 2011 Budget, the Budget 2012 income tax allowance, for those aged under 65, will increase by £630 to £8,105, with an equivalent decrease in the basic rate tax limit to £34,370. The level at which 40% tax will become payable Who can expect to be ‘better’ off following will remain unchanged in 2012/13 at £42,475. This has not increased since George Osborne’s Budget speech? 2010/11 resulting in more taxpayers being subject to higher rates of tax. Parents, low and middle earners and Parents council tax bills came out better off in Plans to end child benefit for higher- Chancellor George Osborne’s 2012 Budget. rate taxpayers have been changed. Budget Low and middle earners The Chancellor said he wanted to 2012 briefing avoid a “cliff edge” – so instead of The personal allowance – the first withdrawing it all at once, the benefit tier of earnings on which no tax is will start to be withdrawn only Income tax age-related allowances due – is to rise next year from £7,475 when an earner brings in more than From 6 April 2013 the age-related to £9,205, an increase of more than £50,000 a year, rather than at about personal allowances will be frozen. In £1,000. Millions could be more than £42,000, and it will be withdrawn addition, eligibility will be restricted to £200 a year better off. gradually – 1% of benefit for every those born on or before: £100 earned over £50,000. As a The centre piece of Budget 2012, the move result, an extra 750,000 people will n 5 April 1948 for the will cut the tax bills for anyone earning less keep some or all of this benefit; only £10,500 allowance than £100,000 and will potentially lift two those earning more than £60,000 will n 5 April 1938 for the million people out of paying tax. The tax- lose it altogether. £10,660 allowance free allowance is set rise again to £10,000 in April 2014 – saving most taxpayers Tax treatment People born on or after 6 April 1948 another £250 annually. This is a year earlier From 2014 taxpayers will receive will only be entitled to the personal than planned. a personal tax statement detailing allowance of £9,205 for 2013/14, how much of their tax bill goes to despite being aged 65. High earners pay for services such as health care The government wishes to create a The top rate of tax will be cut from and education. standard tax-free personal allowance 50p to 45p in the pound from April irrespective of age, with the effect that 2013. This is paid by people earning Council tax some pensioners will pay more tax as more than £150,000. The Chancellor 85% of local authorities will be their allowances are brought into line said that a rate of 50p had not made a freezing or reducing their council tax with those of younger taxpayers. huge difference to the tax take. next year.

31.
A Guide toBudget 2012 09 Budget 2012 Who can expect to be ‘worse’ off following George Osborne’s Budget speech? Post Budget 2012 Wealthy property buyers, drinkers, smokers and pensioners have been Mr Osborne has also introduced a 15% stamp duty land tax charge planning tips targeted in Budget 2012. on residential property held in What action should you take now? company shelters. Pensioners Income tax rates will be unchanged The Chancellor George Osborne insisted that Those earning for next year. However, the nobody would lose any money, but inflation more than £116,210 government have recognised means some pensioners will potentially see The Prudential has calculated that that the 50% rate has been a their household budgets squeezed in future individuals with an income above deterrent to inward investment years. More than four million people will be £116,210 (2012/13) will have zero and entrepreneurship as well as £83 worse off by 2014, while 360,000 people personal allowance and will lose £82 encouraged more aggressive tax aged 65 will lose £285. per year (£126 minus £44). avoidance, and acted to reduce this At the moment, around five million to 45% from April 2013. people over the age of 65 pay income Smokers You should be thinking now about tax on their pensions and other earnings. Tobacco duty increased by 5% above whether and how to defer taxable They are currently not taxed on at inflation, putting 37p on the price of a income recognition and accelerate least the first £10,500 of their income. packet of 20 cigarettes. allowances and reliefs; for example, This will now be frozen in future years, pension contributions. saving the Treasury an estimated £360 Drinkers million next year, £670 million in 2014, £1 Alcohol duty rates increased at 2% billion in 2015 and £1.25 billion in 2016. above the Retail Prices Index. There will be a new £2m residential Parents stamp duty land tax property buyers Families with one person earning There will be a new stamp duty land tax £60,000 or more a year will lose all of rate of 7% on residential rate of 7% on residential properties worth their child benefit. properties worth more than £2m, the Chancellor announced in the Budget. Previously the top rate was Motorists more than £2m, the 5%. Unlike other taxes, stamp duty land Fuel duty will rise by 3p a litre in Chancellor announced tax is paid at the applicable rate on the August despite petrol prices rising to whole price, not just the portion above the a record high, the Chancellor, George in the Budget. threshold for the highest rate. Osborne, announced in the Budget.

32.
10 A Guide to Budget 2012 Taxation and Allowances Guide 2012/13 Income tax For vans, the taxable benefit for significant private use is £3,000 (£3,000). The benefit charge for electric cars and vans is nil until 5 April 2015. Bands 2012/13 2011/12 Fuel: if fuel is provided for private use in a company car, the car The first: £0-£34,370 (£0-£35,000) 20% (20%) benefit percentage is applied to £20,200 (£18,800). £34,371-£150,000 (£35,001-£150,000) 40% (40%) Over: £150,000 (£150,000) 50% (50%) The benefit for fuel provided for a van with significant private use is £550 (£550). Dividends are taxed at 10% (10%), 32.5% (32.5%) or 42.5% (42.5%) as the top slice of total income. National insurance contributions (NIC) Other savings income, primarily bank and building society interest, is taxed at 10 up to £2,710 (£2,560). This 10% rate is not available if taxable non- Class 1 employees: savings income exceeds £2,710 (£2,560). There are special rules for trusts, and also for individuals with in- Weekly earnings Contracted in Contracted out come assessable on the remittance basis. From 6 April 2013, the 50% rate of income tax is expected to re- Up to £107 (£102) Nil (nil) Nil (nil) duce to 45%. £107.01-£146 (£102.01-£139) Nil (nil) Rebate 1.4% (1.6%) From 7 January 2013, an additional tax charge will apply to claw back £146.01-£770 (£139.01-£770) n/a 10.6% (10.4%) child benefit where one income in a household exceeds £50,000. £770.01-£817 (£770.01-£817) n/a 12% (12%) £146.01-£817 (£139.01-£817) 12% (12%) n/a Personal allowances Over £817 (over £817) 2% (2%) 2% (2%) 2012/13 2011/12 Class 1 employers: Personal £8,105 (£7,475) Income limit for personal allowance (a) £100,000 (£100,000) Weekly earnings Contracted in Contracted out Age allowance (age at end of tax year) (b): Personal: age 65-74 £10,500 (£9,940) Up to £107 (£102) Nil (nil) Nil (nil) Personal: age 75 or over £10,660 (£10,090) £107.01-£144 (£102.01-£136) Nil (nil) Rebate 3.4% (3.7%) Married couple’s (c) £7,705 (£7,295) £144.01-£770 (£136.01-£770) n/a 10.4% (10.1%) Income limit for age allowances £25,400 (£24,000) £770.01-£817 (£770.01-£817) n/a 13.8% (13.8%) Blind person’s allowance £2,100 (£1,980) £144.01-£817 (£136.01-£817) 13.8% (13.8%) n/a Over £817 (over £817) 13.8% (13.8%) 13.8% (13.8%) (a) he personal allowance is reduced by £1 for each £2 by which T income exceeds £100,000, irrespective of age. Other: (b) ge-related allowances first reduce by £1 for each £2 by which A Class 1A (employers only): 13.8% (13.8%) based on the amounts of tax- income exceeds the income limit, reducing to a minimum of the per- able benefits. sonal allowance. Such allowances can be reduced further under (a). Class 1B (employers only): 13.8% (13.8%) in respect of amounts in a (c) elief is limited to 10%, and extends to civil partnerships. At least one R PAYE settlement agreement and the income tax thereon. spouse/partner must have been born before 6 April 1935. The allow- Class 2 (flat rate for self-employed): £2.65 (£2.50) per week. ance is reduced where income exceeds the income limit, subject to Class 3 (voluntary): £13.25 (£12.60) per week. an absolute minimum of £2,960 (£2,800). In certain circumstances Class 4 (self-employed): 9% (9%) of profits between £7,605 couples may determine how the allowance may best be used. (£7,225) and £42,475 (£42,475) per annum and 2% (2%) on profits above £42,475 (£42,475). Pensions Bank levy 2012/13 2011/12 Lifetime allowance (a) £1,500,000 (£1,800,000) Annual tax on certain short-term chargeable liabilities and long- Equivalent to defined benefit pension £90,000 £90,000) ( term chargeable Maximum contribution annual allowance (b) £50,000 £50,000) ( equity and liabilities above an aggregate of £20 billion of most UK Tax on excess Marginal rate (marginal rate) based banks. Normal minimum pension age 55 55) ( Short-term liabilities 0.078% (a) Special rules can apply to individuals with larger benefits at 5 April Long-term equity and liabilities 0.039% 2006, and for those with benefits over £1,500,000 on 5 April 2012. Lower rates applied prior to 1 January 2012. Excess over the lifetime allowance may be subject to a 25% charge plus income tax on balances drawn, or 55% for lump sum benefits. From 1 January 2013, the rates will increase to 0.105% and 0.0525% (b) Unused allowances from the previous three years (by reference for short-term to a limit of £50,000 p.a.) may be carried forward, potentially liabilities and long-term equity and liabilities respectively. increasing the current year’s allowance in 2012/13 and subsequent tax years. Insurance premium tax Company cars – annual benefits Standard rate 6% Higher rate 20% The annual benefit is a percentage of list price, with the percentage de- pendent on the level of CO2 emissions. The minimum benefit is 5% for Capital gains tax emissions of 75g/km or less. For emissions of over 75 and up to 99g/ 2012/13 2011/12 km, the rate is 10%. For emissions of 100-104g/km, the rate is 11% and For standard rate taxpayers 18% (18%) increases by 1% for each additional full 5g/km up to a maximum charge For trustees and higher 28% (28%) of 35% for emissions of 220g/km or more. Emission levels are rounded /additional rate taxpayers down to the nearest multiple of five. List price includes certain accesso- Annual exempt amount – individuals £10,600 (£10,600) ries, but is reduced for capital contributions of up to £5,000. Annual exempt amount – trusts £5,300 (£5,300) There is a diesel supplement of 3% for all bands, subject to a maxi- Entrepreneurs’ relief lifetime limit £10,000,000 £10,000,000) mum charge of 35%. Entrepreneurs’ rate 10% (10%)

33.
A Guide toBudget 2012 11 Inheritance tax Stamp duties Nil rate band: up to £325,000 (£325,000) – 0% (0%) 2012/13 2011/12 Over £325,000 (£325,000) – 40% (40%). Stamp duty land tax on non-residential land and buildings (a) (b): £0-£150,000 0% (0%) Reduced charge on lifetime gifts within seven years of death applies. £150,001-£250,000 (£150,001-£250,000) 1% (1%) A surviving spouse or civil partner may claim the unused propor- £250,001-£500,000 (£250,001-£500,000) 3% (3%) tion of an earlier deceased spouse’s or civil partner’s nil rate band Over £500,000 (over £500,000) 4% (4%) up to the current nil rate band. Stamp duty land tax on residential land and buildings (a) (b) (c): £0-£125,000 (£0-£125,000) (d) (e) 0% (0%) From 6 April 2012, a reduced rate of 36% applies when 10% or £125,001-£250,000 1% (1%) more of a net estate is left to charity. (£125,001-£250,000) (d) (e) £250,001-£500,000 (£250,001-£500,000) 3% (3%) Tax-efficient investments £500,001-£1,000,000 (£500,001-£1m) 4% (4%) £1,000,001-£2,000,000 (over £1,000,000) 5% (5%) 2012/13 2011/12 Over £2,000,000 (f) 7% (5%) ISA investment limit £11,280 (£10,680) Cash ISA maximum investment £5,640 (£5,340) (a) ll figures are calculated inclusive of any VAT. Rates apply to A Junior ISA investment limit cash £3,600 (£3,600) the full amount. or shares (a) (b) n leases, the rate is (broadly) 1% of the discounted rental O (a) From 1 November 2011, for children aged under 18 without a values under the lease over the £150,000/£125,000 limit. Child Trust Fund. (c) For new zero carbon homes, including flats, the 0% threshold Venture capital trusts (VCTs): income tax relief at up to 30% on extends to £500,000 until 30 September 2012; for such prop- investment up to £200,000. erties over £500,000 there is a £15,000 reduction. (d) For residential property in disadvantaged areas, the 0% threshold Enterprise investment scheme (EIS): income tax relief at up to 30% extends to £150,000. on qualifying share subscription between £500 and £1,000,000 (e) he 0% threshold extended to £250,000 for first time buyers T (£500,000). only for purchases where the date of completion was between Seed enterprise investment scheme (SEIS): income tax relief of 25 March 2010 and 24 March 2012. 50% on investment up to £100,000, together with rollover of (f) ate applies from 22 March 2012. Where residential property R gains made in 2012-13 into the subscription. over £2 million is purchased by a company (or similar entity), a 15% rate applies. Corporation tax Stamp duty – shares and securities 0.5% (0.5%) Stamp duty reserve tax 0.5%/1.5% (0.5%/1.5%) From 1 April 2012 2011 Small profits rate £0-£300,000 20% (£0-£300,000 20%) Marginal rate £300,001-£1,500,000 25% (£300,001-£1,500,000 27.5%) Value added tax Main rate (a) Over £1,500,000 24% (Over £1,500,000 26%) (a) he main rate will further decrease by 1% in each year until financial T Standard rate 20% year 2014 when the main rate will be 22%. Lower rate 5% Zero rate 0% Capital allowances Registration threshold (changes from 1 April 2012): taxable supplies at the end of any month exceed £77,000 (£73,000) in the Expenditure on: 2012/13 past 12 months, or will at any time exceed £77,000 (£73,000) in 2011/12 the next 30 days. These thresholds also apply for supplies from Plant and machinery: (a) 18% (20%) other EU Member States. Plant and machinery in enterprise zones 100% (n/a) Motor cars on or after April 2009 – CO2 emissions 110g/km 100% (100%) Air passenger duty 110g/km-160g/km (a) 18% (20%) 160g/km (a) 8% (10%) Air passenger duty is a departure tax levied on air travel. Rates Motor cars pre April 2009 (a) (b) 18% (20%) per passenger: New and unused zero emission goods vehicles 100% (100%) Reduced rate Standard rate Long life assets/features in buildings (a) 8% (10%) From 1 April 2012 (a) Patent rights and know-how (a) (c) 25% (25%) Band A (0-2,000 miles from London) (b) £13 (£12) £26 (£24) Mines, oil wells, mineral rights (a) (d) 25% (25%) Band B (2,001-4,000 miles from London) £65 (£60) £130 (£120) Research and development 100% (100%) Band C (4,001-6,000 miles from London) £81 (£75) £162 (£150) Energy-saving and water efficient machinery 100% (100%) Band D (over 6,000 miles from London) £92 (£85) £184 (£170) Renovation of premises (disadvantaged areas) 100% (100%) (a) Flights from airports in the Scottish Highlands and Islands are exempt. There is a 100% annual investment allowance on the first (b) Includes all long haul flights from Northern Ireland. £25,000 (£100,000), per group of companies or related entities, of capital expenditure Climate change levy on plant and machinery including long life assets and integral features, but Electricity 0.509p (0.485p) per kWh Gas 0.177p (0.169p) excluding cars. per kWh (a) hese allowances are given on a reducing balance basis. T Coal, lignite, coke and semi-coke 1.387p (1.321p) per kg Liquid (b) Subject to a maximum allowance of £3,000 p.a. per vehicle. petroleum gas 1.137p (1.083p) per kg (c) For expenditure from April 2002 accounting write downs Climate change levy is a single stage tax on supplies of various (and not capital allowances) are allowable deductions for tax. fuels to industrial and commercial consumers. (d) Acquisition of mineral deposits and rights qualify for 10% p.a.

34.
12 A Guide to Budget 2012 Current 50p top tax rate will be cut to 45p £16 billion of income was deliberately shifted into the previous tax year – at a cost to the taxpayer of £1 billion The Chancellor George Osborne tax year – at a cost to the taxpayer officials refused to say if the 45p band confirmed during his Budget 2012 of £1 billion, something that the for those earning over £150,000 will be speech that the current 50p top tax previous government’s figures made no merely ‘temporary. ’ rate will be cut to 45p from April 2013. allowance for.’ Those earning £150,000 or more have Mr Osborne also argued that the been subject to the 50% rate since April increase to 50p in 2010 raised about a Mr Osborne said that 2010, when it was brought in by the third of the £3 billion the government the 50p tax rate would Labour government. hoped it would raise, and cutting it to 45p would only cost the government only be justified if it Massive distortions £100 million. raised a significant Mr Osborne said that the 50p tax rate would only be justified if it raised Scrapped altogether amount of money but a significant amount of money but There are currently around 300,000 evidence from HM evidence from HM Revenue and Customs people in the UK who earn £150,000 (HMRC) showed that the rate caused or more; of those 14,000 earn over £1 Revenue and Customs ‘massive distortions.’ million a year. (HMRC) showed He said: ‘HMRC found that an It was widely predicted the tax would astonishing £16 billion of income was be reduced from 50p to 45p rather than that the rate caused deliberately shifted into the previous being scrapped altogether but senior ‘massive distortions.’

35.
A Guide toBudget 2012 13 Budget 2012 briefing Inheritance Tax matters The government will consult on legislation to increase the Inheritance Tax (IHT) exempt amount that a UK domiciled individual can transfer to their non UK domiciled spouse or civil partner. The government similarly proposes to allow individuals who are domiciled outside the UK and who have a UK domiciled spouse or civil partner to elect to be treated Budget as domiciled in the UK for the purposes of IHT. Legislation will be in Finance Bill 2013. 2012 briefing Offshore trusts Legislation will be introduced in Finance Bill 2012 to amend the excluded property and settled property provisions in order to close Tax evasion and aggressive tax evasion an avoidance scheme involving the acquisition of interests in The Chancellor said he would implement tax avoidance schemes. The government offshore trusts by UK-domiciled a general anti-abuse rule from April 2013 will consult with a view to bringing forward individuals. The changes will ensure to tackle abuses by business seeking legislation in the Finance Bill 2013. that any reduction in the value of to divert profits to low-tax havens or a person’s estate as a result of the devise schemes to evade taxes. He said arrangements is charged to IHT. the Treasury would spend the next year The Treasury will The changes will largely consulting interested parties before follow the Aaronson replicate the tax treatment that deciding on the fine detail. a UK-domiciled individual using Changes to the rules on tax paid by UK recommendations by such a scheme would incur if the companies will allow them to cut the amount implementing assets within the offshore trust they pay on profits made by their foreign had instead been transferred to a subsidiaries. The aim is to allow firms to a GAAR targeting UK trust. This measure took effect pay local taxes without a surcharge by the ‘artificial and abusive’ tax from 21 March 2012. Treasury to bring the corporation tax rate up to UK levels. avoidance schemes. The Charitable legacies – Mr Osborne said: ‘I regard tax government will consult reduced rate of IHT evasion and aggressive tax evasion as Legislation will be introduced in morally repugnant.’ with a view to bringing Finance Bill 2012 which will apply a The Treasury will follow the Aaronson forward legislation in the reduced rate of IHT to estates where recommendations by implementing a minimum of 10% of the estate is a GAAR targeting ‘artificial and abusive’ Finance Bill 2013. left to charity.

36.
14 A Guide to Budget 2012 “Simplifying” the tax system and spreading tax relief across everyone Extra allowance will gradually reduce for pensioners, whose taxable income is between £24,000 and about £29,000 The amount of income that is not taxed pensioner earning more than £29,000. Within the total, 360,000 individuals will be frozen for those aged over There is also a gradual withdrawal aged 65 lose an average £285. Some 65, affecting the financial plans for of the basic personal allowance for 230,000 people will be brought those approaching retirement. From everyone with income above £100,000, into income tax. So this will save the April 2013, those reaching age 65 will regardless of age. government £360m in the year it is no longer receive a higher personal introduced, rising to £1.25bn a year by allowance than people of working age. The way tax is calculated 2016/17. This will save the government £1bn In a major shift in the way tax is by 2015, Budget documents have calculated, already dubbed a “granny Pension age revealed. The government said it tax” on Twitter, Chancellor George Although the tax-free income allowance wanted to “simplify” the tax system Osborne has said that income tax is rising for the under-65s, HMRC has and spread tax relief across everyone, personal allowances will change in the confirmed that 300,000 will be drawn regardless of age. following way: into higher rate tax from 2013/14. n he under 65s’ personal allowance T The change comes as a result of the In brief will increase to £9,205 in April 2013 higher rate threshold being reduced n he amount of income that is tax- T - that relates to people born after 5 from £42,475 to £41,450 - the point at free - the personal allowance - is April 1948 which people start paying 40% tax on greater at present for most people n personal allowance of £10,500 A their income. aged over 65 will be restricted to most people Meanwhile, Mr Osborne confirmed n he system will be changed so T born after 5 April 1938, but before that he would set up an “automatic eventually, everyone will have the 6 April 1948 review” of the state pension age to same personal allowance n he personal allowance of most T make sure it keeps on rising if people n Some 4.41 million people will be people born before 6 April 1938 keep on living even longer, which means worse off in real terms in 2013/14, will be £10,660 to 68 and beyond. The state pension losing £83 on average age is already scheduled to rise to 67, n ithin that, 360,000 people aged W No entitlement to for both men and women, by 2026. 65 lose an average of £285 the higher personal allowance This will save the Source: HM Revenue and The change means that as people turn Customs (HMRC) 65, they will not be entitled to the government £1bn by higher personal allowance set aside for 2015, Budget documents For those aged between 65 and 74, most pensioners. the personal allowance, the amount of Instead, they will receive the same have revealed. The income that is tax-free, has been set at as everyone else. As time goes on, government said it £10,500 from April. For those aged 75 more and more people will fall into and over, the allowance will be £10,660. this group. As a result, in 2013/14, wanted to “simplify” the This extra allowance gradually some 4.41 million people will be worse tax system and spread reduces for pensioners, whose taxable off in real terms with an average loss income is between £24,000 and of £83, HM Revenue and Customs tax relief across everyone, about £29,000. It disappears for any (HMRC) said. regardless of age.

37.
A Guide toBudget 2012 15 The amount of income that is not taxed will be frozen for those aged over 65, affecting the financial plans for those approaching retirement. From April 2013, those reaching age 65 will no longer receive a higher personal allowance than people of working age.

38.
16 A Guide to Budget 2012 Combining the two state pensions into one simplified pension Pensioners will receive a flat-rate state pension, initially it is estimated that it will be worth about £140 a week The Chancellor Mr Osborne by a single scheme, will cost no more The flat rate pension confirmed during his Budget 2012 than the existing state pension system. speech a pledge to combine the two will only apply to state pensions into one simplified Combined pension those retiring after pension, as well as increasing the payments implementation. state pension age automatically in This means that while those on low line with rises in longevity. incomes who have made small or Pensioners already The full basic state pension is no contributions to S2P will benefit receiving the state currently £102.15 a week, rising to from a higher pension than they pension will not move £107.45 from April this year. Pensioners could currently expect, people who will receive a flat-rate state pension, earn higher salaries may lose out. onto the new scheme. initially it is estimated that it will be The current full basic state pension is worth about £140 a week for those £102.15 a week (rising to £107.45 from state pension will not move onto the with a 30-year national insurance April 2012), but those at the top end of new scheme. record, from 2016. the salary scale can expect up to £180 Mr Osborne also announced that an a week in combined pension payments. automatic review of the state pension Replaced by age (SPA) would be introduced to a single scheme Automatic review of the take account of increases in longevity. The government says the long-awaited state pension age Details of how this will be done will change, which will see the current basic The flat rate pension will only apply be published alongside the Office state pension and second state pension to those retiring after implementation. for Budget Responsibility fiscal (S2P, formerly known as Serps) replaced Pensioners already receiving the sustainability report.

39.
A Guide toBudget 2012 17 Government plans to withdraw child benefit from parents who earn higher levels of income All sections of society must make a contribution to dealing with the deficit Under changes announced by the Perceived problem Entitlement under the Chancellor George Osborne in his The government had planned to original proposals Budget speech, households with one remove the benefit from households Some 7.8 million families receive child person earning more than £50,000 a in which someone earns more than benefit, of which 1.2 million would year will lose some of their child benefit. £42,475 in January 2013. have lost their entitlement under Mr Osborne said it was important The perceived problem was an anomaly the original proposals. The number that “all sections of society must that a family with a single earner taking affected will be lower under the make a contribution to dealing with home more than £42,475 would lose child renewed plans. the deficit” and cautioned that the benefit, but a couple each earning slightly Three million taxpayers earning over welfare budget needed to be cut less than this could take home £80,000 £50,000 will be sent letters in the back because social security would and keep the benefit. autumn asking if they or anyone in consume one-third of public spending The other issue of debate was the their household receives child benefit if left unchecked. “cliff-edge”. That meant someone - in order for some to be clawed back earning £42,475 or below would through tax from January 2013. Reducing the deficit receive the full child benefit. As soon The income tax charge could be Until now, child benefit has been as they earned £42,476, they would levied from monthly pay cheques, via universally paid to families of all lose every penny of the child benefit. people’s personal tax codes. Otherwise, backgrounds. But the government says The benefit will fall by 1% for every the first tax bills for child benefit people on “higher incomes” should £100 earned over £50,000. That means will have to be settled by the end of “contribute more” in order to reduce those earning more than £60,000 will January 2014. the deficit. lose the entirety of the benefit. Government plans to withdraw child benefit from parents who earn higher levels of income have been altered. Chancellor George Osborne said that the benefit would only be withdrawn entirely from those where one partner earns more than £60,000 a year. The benefit will be withdrawn gradually from those where one parent earns more than £50,000. Child benefit totals £20.30 a week for the first child, and then £13.40 for each subsequent child. There is no limit to the number of children that can be claimed for. So, for a family with two children, one parent would receive £33.70 per week or £1,752.40 per year. The equivalent in terms of earnings, taking income tax into account, would make it worth £2,190.50 for a basic rate taxpayer and £2,920.67 for a higher rate taxpayer.

40.
18 A Guide to Budget 2012 Budget 2012 briefing Pension contributions for spouses or family members The Chancellor announced during his Budget Speech that “from April 2013 pension contributions Budget 2012 briefing paid into spouses or family members’ registered pension schemes cannot be used to obtain any tax or National Insurance Contribution advantages. “This addresses the recent Enterprise Investment Schemes (EIS) and growing practice where Venture Capital Trusts (VCTs) employees who have reached their £50,000 annual cap are As previously announced in Budget 2011, and companies raising money under these diverting contributions from their the attraction of Enterprise Investment schemes will be affected. employer into their spouses or Schemes (EIS) and Venture Capital The increase in the annual amount that family member’s pension funds to Trusts (VCTs) was enhanced through an individual can invest under EIS will apply obtain tax relief. simplifications to the rules and increased with effect from 6 April 2012. It also helps to utilise any thresholds. This included removing some available spouse’s pension relief. restrictions on qualifying shares and types The changes to EIS will Some employers have been implementing this as part of of investor. In addition, the EIS annual investment limit for individuals will be apply to shares issued on flexible benefits packages and increased to £1 million from 6 April 2012. or after 6 April 2012. The it would appear that HMRC are change to the investment concerned that this practice may Minimum subscription become more widespread.” Following consultation, the £500 minimum limit by a VCT in a single subscription for EIS will be removed. The company will apply to definition of shares which qualify for relief shares issued on or after Budget will be widened and the rules relating 1 April 2012. 2012 briefing to whether an investor in a company is connected will be relaxed. For VCTs, the £1 million limit on Shares issued on Income tax rules on interest investment by a VCT in a single company or after 6 April 2012 will be removed (except for companies in a The changes to EIS will apply to shares Legislation surrounding the taxation partnership or joint venture). issued on or after 6 April 2012. The change of interest, and the deduction of to the investment limit by a VCT in a single tax at source, will be subject to a Thresholds increased company will apply to shares issued on or government consultation with a The thresholds for the size of a qualifying after 1 April 2012. view to amended legislation being company for both EIS and VCT will be The increases to the company size limits introduced from April 2013. increased and the maximum annual amount and the annual investment amount that This measure is particularly aimed that can be invested in an individual a company may receive for both EIS and at pensioners who may not be company under all the venture capital VCT will have effect for investee company liable to income tax on their savings schemes will be increased to £5 million. shares issued on or after 6 April 2012. This is depending on their total income. Individuals investing into these schemes subject to state aid approval.

41.
A Guide toBudget 2012 19 Budget Budget 2012 briefing 2012 briefing Enterprise Management Incentives (EMI) Anti avoidance: Life insurance policies The limit set for the share option Senior employees of small and medium scheme focused on small and sized businesses will be affected which Gains from life insurance policies, medium sized businesses, Enterprise issue EMI share options. life annuity contracts and capital Management Incentives (EMI), is set to The government needs state aid redemption policies are taxed as increase. Currently, the value of qualifying approval to implement this measure, but income. The charge arises on the options which can be issued to any one plans to push through the changes by occurrence of a ‘chargeable event employee is £120,000. This limit will be Statutory Instrument as soon as possible gain’ such as the maturity of a policy. increased to £250,000. The restriction, given this constraint. Changes were announced to which stops further options from being the rules in calculating gains from granted until a period of three years has certain policies and contracts. passed following the limit being reached, is to remain. The overall company limit of Post Budget 2012 The changes confirm that gains, which are subject to income tax, options of £3 million is also set to remain. EMI reform proposals planning tips are not reduced by any untaxed gains earlier in the life of the policy or contract. The government also proposes to reform What action should you take now? In addition, income gains are EMI in Finance Act 2013 allowing gains not reduced by the use of certain arising from 6 April 2012 on the sale of Companies with offshore interests cluster arrangements. In addition, shares acquired through an EMI scheme should review their structures to the government has announced a to be eligible for Entrepreneurs’ Relief. minimise the impact and maximise consultation on reform to the time This will reduce the effective rate of the opportunities of the CFC and apportionment of gains when the CGT suffered on any gains to 10%. The Patent Box changes (especially finance taxpayer is not resident in the UK government will consult on extending the company exemptions and taxing for a period. EMI option scheme to academics, who do intellectual property at 10%). UK resident individuals will be not always meet the qualifying criteria. affected who own life insurance policies, life annuity contracts and capital redemption policies, where there have been gains earlier in the life of the policy which were not subject to income tax, or certain cluster policy arrangements which defer income tax until the final policy in the cluster comes to an end. The measures have taken immediate effect.

42.
20 A Guide to Budget 2012 Post Budget 2012 planning tips A Budget What action should you take now? Business owners should start to give for business careful thought to how to maximise pension contributions at the highest rate (50%) and how and when these should be funded by their companies, especially given that effective dividend rates will reduce from 36.1% Changes that could greatly affect the UK’s to 30.6% from 6th April 2013. small and medium-sized enterprises Tax simplifications Corporation tax Youth enterprise loans From April 2013, companies with sales The basic rate will now fall to 24% Under a one-year pilot scheme to be of up to £77,000 per year will be from April 2102, down from the current launched by March 2013, up to 7,000 allowed to change their accounting 26%. This change does not affect young people aged between 18 and from the established accrual method small firms, as those with profits not 24 will be able to apply to borrow to a cash basis. What this means is exceeding £300,000 a year already between £5,000 and £10,000 to back that firms will only have to pay tax only have to pay 20%. Future cuts will their business idea. on the amount of money they have see the main rate of corporation tax actually received, rather than total drop to 23 per cent in April 2013 and Business rates orders, as under the current accrual- 22 per cent in April 2014. Business rates will go up by 5.6% based system. from April 2012, as had previously If successful, the Treasury will then Patent box been announced. consider expanding the change to Small firms which have patented a firms with sales of up to £150,000 per product will be able to benefit from Fuel duty year, which it estimates would mean the so-called Patent Box. Coming into The Budget offered no reprieve for small more than three million firms being effect from April 2013, the Patent Box firms struggling with the high price of able to benefit. is a reduced level of corporation tax on petrol and diesel. Instead, fuel duty will George Osborne also confirmed profits attributed to patents and similar continue to go up by 3p in August. that the government is to move types of intellectual property. ahead with plans to integrate income As confirmed by the chancellor, New loan scheme tax and national insurance, first it will introduce a lower rate of 10%. The introduction of a new bank lending announced in last year’s Budget, so Sectors likely to benefit most scheme - was announced a day before firms do not have to run two different include pharmaceuticals and the the Budget. Under the £20bn National payroll tax systems. software industry. Loan Guarantee Scheme (NLGS),

43.
A Guide toBudget 2012 21 Budget Post Budget 2012 2012 briefing Small firms which have Changes to Registered Overseas planning tips patented a product will Pension Scheme rules members What action should you take now? be able to benefit from The government will introduce The individual limit on qualifying the so-called Patent changes to tighten up the tests to Enterprise Management Incentives be a Qualifying Registered Overseas (EMI) options will increase from Box. Coming into effect Pension Scheme (QROPS). It will £120,000 to £250,000. This makes also make various amendments to EMI schemes even more attractive from April 2013, the the reporting requirements. to businesses wishing to retain Patent Box is a reduced People who will be affected and incentivise employees in a tax are members of a QROPS or who efficient manner. level of corporation tax wish to transfer their pensions into Potentially of greater benefit is on profits attributed to a QROPS, and QROPS scheme the announcement that gains on EMI administrators. The changes come shares will qualify for entrepreneur’s patents and similar types into effect from 6 April 2012, relief at 10% tax for exercises post 6 although there are some transitional April 2012. of intellectual property. rules. Individuals holding EMI options should not exercise options before 6 April 2012 without taking advice first. Budget SMEs will be able to access loans with 2012 briefing interest rates one percentage point lower What action should you than those available outside the initiative. take now? Barclays, Santander, Lloyds and Royal Bank of Scotland have so far signed up, and firms Business owners should continue to with an annual turnover of up to £50m will review their business structure to be able to participate. take advantage of the difference in The discounted loans are being made income tax and corporate tax rates. available because the government is The potential benefits of maximising to guarantee £20bn of the banks’ own the arbitrage between the two borrowing, thereby allowing the lenders will be greatest in 2012/2013; for to borrow more cheaply than they example income tax 50% versus normally do. corporate tax 24%). There are a number of solutions which can help deliver these tax benefits. Corporation taX RATES Rate 2011 2012 2013 Small Profits Rate 20% 20% Small Profits Rate can be £300,000 £300,000 claimed by qualifying companies with profits at a rate not exceeding Marginal Relief Lower Limit £300,000 £300,000 Marginal Relief Upper Limit £1,500,000 £1,500,000 Standard fraction 3/200 1/100 Main rate of Corporation Tax 26% 24% 23% Special rate for unit trusts and 20% 20% open-ended investment companies

44.
Content of thearticles featured in ‘A Guide to Budget 2012’ is for your general information and use only and is not intended to address your particular requirements. They should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions. Published by Goldmine Media Limited, Prudence Place, Luton, Bedfordshire, LU2 9PE Articles are copyright protected by Goldmine Media Limited 2011. Unauthorised duplication or distribution is strictly forbidden.

Origin Financial A Guide To Budget 2012 Singles

More Related Content

What's hot

Viewers also liked

Similar to Origin Financial A Guide To Budget 2012 Singles

More from Oliver Taylor

Origin Financial A Guide To Budget 2012 Singles