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A Guide toBUDGET2012How will the Chancellor’s announcementsaffect you and your family?
02   A Guide to Budget 2012                                                                                               ...
04   A Guide to Budget 2012                                                                                               ...
06   A Guide to Budget 2012                                                                                               ...
08   A Guide to Budget 2012                                                                                               ...
10         A Guide to Budget 2012                                                                                         ...
12   A Guide to Budget 2012                                                                                               ...
14   A Guide to Budget 2012                                                                                               ...
Origin Financial A Guide To Budget 2012 Spreads
Origin Financial A Guide To Budget 2012 Spreads
Origin Financial A Guide To Budget 2012 Spreads
Origin Financial A Guide To Budget 2012 Spreads
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Origin Financial A Guide To Budget 2012 Spreads


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Origin Financial A Guide To Budget 2012 Spreads

  1. 1. A Guide toBUDGET2012How will the Chancellor’s announcementsaffect you and your family?
  2. 2. 02 A Guide to Budget 2012 A Guide to Budget 2012 03 A Guide to Contents Budget 2012 04 Economy and public finances Unwavering commitment to deal with Britain’s 16 Combining the two state pensions into one simplified pension What the Chancellor had to say record debt Pensioners will receive a flat-rate state pension, initially it is estimated that it will be worth about Welcome to ‘A Guide to Budget 2012’. Inside we look at many of the pre-announcements made in predicted, Mr Osborne said. “No Chancellor can justify a tax rate that damages our economy 06 Budget 2012 at a glance The key announcements from the Chancellor’s £140 a week Budget 2011 and the proposed measures that will take effect from 6 April 2013. and raises next to nothing.” He also said a further £1,100 rise in the third Budget speech 17 Government plans to withdraw child benefit from parents who The Chancellor of the Exchequer, George Osborne, presented his third Budget speech to threshold at which income tax is paid from next year would benefit “every working person on low 08 Budget 2012 briefing Income tax rates earn higher levels of income “All sections of society must make a contribution Parliament on, 21 March 2012. It maintained the or middle incomes” and amounted to an extra to dealing with the deficit” government’s strategy to reduce the deficit, contained far-reaching tax reforms and support £220 a year each - or £170 after inflation. Biggest cash increase in the state pension ever 08 Budget 2012 briefing Income tax personal allowance 2012/13 18 Budget 2012 briefing for growth and reward for work. Allowances are currently more generous for the Pension contributions for spouses or family members The Chancellor set out the actions the government will take in three areas - creating over-65s - at £10,500 up to age 74 and £10,660 after that. But they will be frozen, and stopped 08 Budget 2012 briefing Income tax age-related allowances 18 Budget 2012 briefing a stable economy, a fairer, more efficient and for anyone turning 65 after 5 April 2013. Mr Income tax rules on interest simpler tax system and further reforms to support growth. Osborne said it would ‘simplify’ allowances and no pensioner would lose out “in cash terms”. He 08 Budget 2012 Who can expect to be ‘better’ off following 18 Budget 2012 briefing pointed to April’s “biggest cash increase in the George Osborne’s Budget speech? Enterprise Investment Schemes (EIS) and Venture Cutting the tax rate state pension ever” of £5.30 a week. Capital Trusts (VCTs) Mr Osborne announced he would be cutting the tax rate for earnings over £150,000, saying in his Budget it raised “next to nothing.” He is also HM Revenue and Customs figures also show that 300,000 people will be drawn into paying the 40% higher rate tax from 2013/14 because of 09 Budget 2012 Who can expect to be ‘worse’ off following George Osborne’s Budget speech? 19 Budget 2012 briefing Enterprise Management Incentives (EMI) 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 leave millions of working people over £200 better A new 7% rate of stamp duty land tax would be charged on residential properties worth more 10 What the numbers mean to you 2012/13 Taxation and Allowances guide 19 Budget 2012 briefing Anti avoidance: Life insurance policies 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 frozen and come to an end. through a company would face a punitive 15% stamp duty rate. 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 Presenting his Budget speech, the Chancellor £16 billion of income was deliberately shifted into and medium-sized enterprises said: “This Budget supports working families and Avoiding a “cliff edge” effect the previous tax year – at a cost to the taxpayer helps those looking for work. Child benefit had been due to be removed from all families with at least one parent paying the of £1 billion 21 Budget 2012 briefing Changes to Registered Overseas Pension Scheme Unashamedly backing business “It unashamedly backs business. And it is on the side of aspiration: those who want to do better higher, 40% rate, of income tax - about £43,000 - from January 2013. But Mr Osborne said he wanted to avoid a “cliff 13 Budget 2012 briefing Tax evasion and aggressive tax evasion rules members for themselves and for their families.” He defended the decision to cut the top rate of tax by saying five times as much would be edge” effect - so it would now only be withdrawn when someone in a household earned more than £50,000, at a rate of 1% of the benefit for every £100 13 Budget 2012 briefing Inheritance Tax matters raised from the wealthiest by other tax and anti- avoidance measures being brought in. up until £60,000, when it would be cut entirely. 14 “Simplifying” the tax system and spreading tax relief He said the rate was the highest among To discuss how the Budget 2012 across everyone G20 countries and damaged competitiveness. changes could have impacted Extra allowance will gradually reduce for A report into the highest rate had found it on your financial plans, please pensioners, whose taxable income is between had raised just a third of the £3bn initially contact us for further information. £24,000 and about £29,000
  3. 3. 04 A Guide to Budget 2012 A Guide to Budget 2012 05 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.
  4. 4. 06 A Guide to Budget 2012 A Guide to Budget 2012 07 The key announcements n Doubling rate of council tax relief from the Chancellor’s for military families n here will be an extra £100 million T to improve accommodation for the third Budget speech armed forces families Public sector n nformation to be published on a I case for regional public sector pay. Economy n igher rate tax band frozen at H Property Option for government departments n he Chancellor Mr Osborne said T £42,475, reducing the basic rate tax n ew stamp duty of 7% on residential N to move to regional pay structures he would deliver a “strategy where band from £35,000 to £34,370 properties worth £2 million or more for civil servants when current financial services are strong but not n Tax-free allowance band rises to n xtra funding to help construction E freeze ends 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% The Chancellor n ffice of Budget Responsibility O of total income for anyone claiming Mr Osborne said (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 he would deliver 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 “strategy where financial 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 services are strong but 2014, 3% in 2015/16 n Age-related allowances will eventually not the only backbone 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 £ to the economy” 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 Business n Deficit is falling and forecast to n A general anti-evasion law to come seek major savings in costs borne by n Simpler tax system for businesses reach 7.6% this year into place businesses or replace with different tax to navigate n n course for debt reduction O n Simplified tax system for small firms by 2016/17 Pensions Financial Services with a turnover of up to £77,000 n overnment is borrowing at cheapest G n utomatic review of state pension A n ank levy to be increased to 0.105% B n id-cap businesses fund increased M prices than at any time in 400 years age to ensure it keeps pace with from January 2013 “to ensure that by 20% n orrowing this year is to come in at B increasing life spans corporation tax cuts do not benefit n nterprise finance guarantee to be E £126 billion n Self-assessment forms for the banks expanded pensioners scrapped n 70 million development fund to £ Employment n ew single-tier state pension for N Technology attract new businesses and new jobs n BR forecasts unemployment to O future pensioners to be set at about n UK to become “Europe’s technology n ax credits for television T peak this year at 8.7% before falling £140 and based on contributions centre” – starting with digital. programming, games industry each year to 6.3% by 2016/17 n 5.30 increase in state pension £ n 50 million will be made available for £ and animation n ne million new jobs will be created O broadband in smaller cities - plans to n nhanced capital allowances for E in the next 5 years Benefits have 90% with access to super-speed businesses setting up in new Scottish n xploring idea of enterprise E n hild benefit – will only be C broadband, funding ultra-fast in 10 enterprise zones in Dundee, Irvine loans for young people to start withdrawn when someone in the UK cities and Nigg - a Welsh enterprise zone own businesses household has more than £50,000 to be created in Deeside income, and will be withdrawn Military n overnment support for £150 million G Taxation slowly – keeping some benefits n overnment spending lower than G of tax increment financing to help n he additional rate of tax has been T n eople with income of £60,000 or P expected in Afghanistan - the cost of councils promote development and reduced from 50% to 45% from more will not receive any operations is £2.4 billion lower over an extra £270 million for the Growing April 2013 child benefit this parliament Places fund
  5. 5. 08 A Guide to Budget 2012 A Guide to Budget 2012 09 Budget 2012 briefing Budget 2012 Income tax rates Who can expect to be ‘worse’ off following Income tax rates are unchanged for the George Osborne’s Budget speech? Post Budget 2012 tax year 2012/13. For 2013/14, the main rates of income tax will be 20% basic rate, Wealthy property buyers, drinkers, smokers and pensioners have been Mr Osborne has also introduced a 15% stamp duty land tax charge planning tips 40% higher rate and a lower additional targeted in Budget 2012. on residential property held in What action should you take now? rate of 45% (reduced from 50%). company shelters. The additional tax rate for dividends Pensioners Income tax rates will be unchanged from April 2013 will also be reduced from The Chancellor George Osborne insisted that Those earning for next year. However, the 42.5% to 37.5%. The trust rate of tax will nobody would lose any money, but inflation more than £116,210 government have recognised be reduced from 50% to 45% and the means some pensioners will potentially see The Prudential has calculated that that the 50% rate has been a dividend trust rate from 42.5% to 37.5%. 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 Budget £83 worse off by 2014, while 360,000 people aged 65 will lose £285. personal allowance and will lose £82 per year (£126 minus £44). encouraged more aggressive tax avoidance, and acted to reduce this 2012 briefing At the moment, around five million people over the age of 65 pay income Smokers to 45% from April 2013. You should be thinking now about Income tax personal tax on their pensions and other earnings. Tobacco duty increased by 5% above whether and how to defer taxable allowance 2012/13 They are currently not taxed on at inflation, putting 37p on the price of a income recognition and accelerate As announced in the 2011 Budget, the least the first £10,500 of their income. packet of 20 cigarettes. allowances and reliefs; for example, Budget 2012 income tax allowance, for those aged This will now be frozen in future years, pension contributions. under 65, will increase by £630 to £8,105, saving the Treasury an estimated £360 Drinkers with an equivalent decrease in the basic million next year, £670 million in 2014, £1 Alcohol duty rates increased at 2% rate tax limit to £34,370. The level at billion in 2015 and £1.25 billion in 2016. above the Retail Prices Index. which 40% tax will become payable Who can expect to be ‘better’ off following There will be a new will remain unchanged in 2012/13 at £2m residential Parents stamp duty land tax £42,475. This has not increased since George Osborne’s Budget speech? property buyers Families with one person earning 2010/11 resulting in more taxpayers being There will be a new stamp duty land tax £60,000 or more a year will lose all of rate of 7% on residential subject to higher rates of tax. Parents, low and middle earners and Parents rate of 7% on residential properties worth their child benefit. properties worth council tax bills came out better off in Plans to end child benefit for higher- more than £2m, the Chancellor announced Chancellor George Osborne’s 2012 Budget. rate taxpayers have been changed. in the Budget. Previously the top rate was Motorists more than £2m, the Budget Low and middle earners The Chancellor said he wanted to 5%. Unlike other taxes, stamp duty land Fuel duty will rise by 3p a litre in Chancellor announced 2012 briefing avoid a “cliff edge” – so instead of tax is paid at the applicable rate on the August despite petrol prices rising to The personal allowance – the first withdrawing it all at once, the benefit whole price, not just the portion above the a record high, the Chancellor, George in the Budget. tier of earnings on which no tax is will start to be withdrawn only threshold for the highest rate. Osborne, announced in the Budget. 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.
  6. 6. 10 A Guide to Budget 2012 A Guide to Budget 2012 11 Taxation and Allowances Guide 2012/13 Income tax For vans, the taxable benefit for significant private use is £3,000 (£3,000). Inheritance tax Stamp duties 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 Nil rate band: up to £325,000 (£325,000) – 0% (0%) 2012/13 2011/12 The first: £0-£34,370 (£0-£35,000) 20% (20%) benefit percentage is applied to £20,200 (£18,800). Over £325,000 (£325,000) – 40% (40%). Stamp duty land tax on non-residential land and buildings (a) (b): £34,371-£150,000 (£35,001-£150,000) 40% (40%) £0-£150,000 0% (0%) Over: £150,000 (£150,000) 50% (50%) The benefit for fuel provided for a van with significant private use Reduced charge on lifetime gifts within seven years of death applies. £150,001-£250,000 (£150,001-£250,000) 1% (1%) is £550 (£550). A surviving spouse or civil partner may claim the unused propor- £250,001-£500,000 (£250,001-£500,000) 3% (3%) Dividends are taxed at 10% (10%), 32.5% (32.5%) or 42.5% (42.5%) tion of an earlier deceased spouse’s or civil partner’s nil rate band Over £500,000 (over £500,000) 4% (4%) as the top slice of total income. National insurance contributions (NIC) up to the current nil rate band. Stamp duty land tax on residential land and buildings (a) (b) (c): Other savings income, primarily bank and building society interest, is taxed £0-£125,000 (£0-£125,000) (d) (e) 0% (0%) at 10 up to £2,710 (£2,560). This 10% rate is not available if taxable non- Class 1 employees: From 6 April 2012, a reduced rate of 36% applies when 10% or £125,001-£250,000 1% (1%) savings income exceeds £2,710 (£2,560). more of a net estate is left to charity. (£125,001-£250,000) (d) (e) There are special rules for trusts, and also for individuals with in- Weekly earnings Contracted in Contracted out £250,001-£500,000 (£250,001-£500,000) 3% (3%) come assessable on the remittance basis. £500,001-£1,000,000 (£500,001-£1m) 4% (4%) From 6 April 2013, the 50% rate of income tax is expected to re- Tax-efficient investments Up to £107 (£102) Nil (nil) Nil (nil) £1,000,001-£2,000,000 (over £1,000,000) 5% (5%) duce to 45%. £107.01-£146 (£102.01-£139) Nil (nil) Rebate 1.4% (1.6%) Over £2,000,000 (f) 7% (5%) 2012/13 2011/12 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%) ISA investment limit £11,280 (£10,680) child benefit where one income in a household exceeds £50,000. £770.01-£817 (£770.01-£817) n/a 12% (12%) (a) ll figures are calculated inclusive of any VAT. Rates apply to A Cash ISA maximum investment £5,640 (£5,340) £146.01-£817 (£139.01-£817) 12% (12%) n/a Junior ISA investment limit cash £3,600 (£3,600) the full amount. Personal allowances Over £817 (over £817) 2% (2%) 2% (2%) 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. 2012/13 2011/12 Class 1 employers: Child Trust Fund. (c) For new zero carbon homes, including flats, the 0% threshold Personal £8,105 (£7,475) Venture capital trusts (VCTs): income tax relief at up to 30% on extends to £500,000 until 30 September 2012; for such prop- Income limit for personal allowance (a) £100,000 (£100,000) Weekly earnings Contracted in Contracted out investment up to £200,000. erties over £500,000 there is a £15,000 reduction. Age allowance (age at end of tax year) (b): (d) For residential property in disadvantaged areas, the 0% threshold Personal: age 65-74 £10,500 (£9,940) Up to £107 (£102) Nil (nil) Nil (nil) Enterprise investment scheme (EIS): income tax relief at up to 30% extends to £150,000. Personal: age 75 or over £10,660 (£10,090) £107.01-£144 (£102.01-£136) Nil (nil) Rebate 3.4% (3.7%) on qualifying share subscription between £500 and £1,000,000 (e) he 0% threshold extended to £250,000 for first time buyers T Married couple’s (c) £7,705 (£7,295) £144.01-£770 (£136.01-£770) n/a 10.4% (10.1%) (£500,000). only for purchases where the date of completion was between Income limit for age allowances £25,400 (£24,000) £770.01-£817 (£770.01-£817) n/a 13.8% (13.8%) Seed enterprise investment scheme (SEIS): income tax relief of 25 March 2010 and 24 March 2012. Blind person’s allowance £2,100 (£1,980) £144.01-£817 (£136.01-£817) 13.8% (13.8%) n/a 50% on investment up to £100,000, together with rollover of (f) ate applies from 22 March 2012. Where residential property R Over £817 (over £817) 13.8% (13.8%) 13.8% (13.8%) gains made in 2012-13 into the subscription. over £2 million is purchased by a company (or similar entity), (a) he personal allowance is reduced by £1 for each £2 by which T a 15% rate applies. 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- Corporation tax Stamp duty – shares and securities 0.5% (0.5%) income exceeds the income limit, reducing to a minimum of the per- able benefits. Stamp duty reserve tax 0.5%/1.5% (0.5%/1.5%) Class 1B (employers only): 13.8% (13.8%) in respect of amounts in a From 1 April 2012 2011 sonal allowance. Such allowances can be reduced further under (a). Small profits rate £0-£300,000 20% (£0-£300,000 20%) (c) elief is limited to 10%, and extends to civil partnerships. At least one R PAYE settlement agreement and the income tax thereon. Marginal rate £300,001-£1,500,000 25% (£300,001-£1,500,000 27.5%) Value added tax 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. Class 3 (voluntary): £13.25 (£12.60) per week. Main rate (a) Over £1,500,000 24% (Over £1,500,000 26%) ance is reduced where income exceeds the income limit, subject to Standard rate 20% Class 4 (self-employed): 9% (9%) of profits between £7,605 (a) The main rate will further decrease by 1% in each year until financial an absolute minimum of £2,960 (£2,800). In certain circumstances Lower rate 5% (£7,225) and £42,475 year 2014 when the main rate will be 22%. couples may determine how the allowance may best be used. Zero rate 0% (£42,475) per annum and 2% (2%) on profits above £42,475 (£42,475). Pensions Capital allowances Registration threshold (changes from 1 April 2012): taxable sup- Bank levy plies 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 2012/13 2011/12 Annual tax on certain short-term chargeable liabilities and long- 2011/12 the next 30 days. These thresholds also apply for supplies from Lifetime allowance (a) £1,500,000 (£1,800,000) term chargeable Plant and machinery: (a) 18% (20%) other EU Member States. Equivalent to defined benefit pension £90,000 £90,000) ( equity and liabilities above an aggregate of £20 billion of most UK Plant and machinery in enterprise zones 100% (n/a) Maximum contribution annual allowance (b) £50,000 £50,000) ( Motor cars on or after April 2009 – CO2 emissions Tax on excess Marginal rate (marginal rate) based banks. 110g/km 100% (100%) Air passenger duty Normal minimum pension age 55 55) ( Short-term liabilities 0.078% 110g/km-160g/km (a) 18% (20%) 160g/km (a) 8% (10%) Air passenger duty is a departure tax levied on air travel. Rates (a) Special rules can apply to individuals with larger benefits at 5 April Long-term equity and liabilities 0.039% per passenger: Lower rates applied prior to 1 January 2012. Motor cars pre April 2009 (a) (b) 18% (20%) 2006, and for those with benefits over £1,500,000 on 5 April 2012. Reduced rate Standard rate New and unused zero emission goods vehicles 100% (100%) Excess over the lifetime allowance may be subject to a 25% charge plus From 1 April 2012 (a) From 1 January 2013, the rates will increase to 0.105% and 0.0525% Long life assets/features in buildings (a) 8% (10%) income tax on balances drawn, or 55% for lump sum benefits. Band A (0-2,000 miles from London) (b) £13 (£12) £26 (£24) for short-term Patent rights and know-how (a) (c) 25% (25%) (b) Unused allowances from the previous three years (by reference Band B (2,001-4,000 miles from London) £65 (£60) £130 (£120) liabilities and long-term equity and liabilities respectively. Mines, oil wells, mineral rights (a) (d) 25% (25%) to a limit of £50,000 p.a.) may be carried forward, potentially Band C (4,001-6,000 miles from London) £81 (£75) £162 (£150) Research and development 100% (100%) increasing the current year’s allowance in 2012/13 and subse- Band D (over 6,000 miles from London) £92 (£85) £184 (£170) Energy-saving and water efficient machinery 100% (100%) quent tax years. Insurance premium tax Renovation of premises (disadvantaged areas) 100% (100%) (a) Flights from airports in the Scottish Highlands and Islands are exempt. Company cars – annual benefits Standard rate 6% There is a 100% annual investment allowance on the first (b) Includes all long haul flights from Northern Ireland. Higher rate 20% £25,000 (£100,000), The annual benefit is a percentage of list price, with the percentage de- per group of companies or related entities, of capital expenditure Climate change levy pendent on the level of CO2 emissions. The minimum benefit is 5% for Capital gains tax on plant and emissions of 75g/km or less. For emissions of over 75 and up to 99g/ 2012/13 2011/12 machinery including long life assets and integral features, but Electricity 0.509p (0.485p) per kWh Gas 0.177p (0.169p) km, the rate is 10%. For emissions of 100-104g/km, the rate is 11% and For standard rate taxpayers 18% (18%) excluding cars. per kWh increases by 1% for each additional full 5g/km up to a maximum charge For trustees and higher 28% (28%) (a) hese allowances are given on a reducing balance basis. T Coal, lignite, coke and semi-coke 1.387p (1.321p) per kg Liquid of 35% for emissions of 220g/km or more. Emission levels are rounded /additional rate taxpayers (b) Subject to a maximum allowance of £3,000 p.a. per vehicle. petroleum gas 1.137p (1.083p) per kg down to the nearest multiple of five. List price includes certain accesso- Annual exempt amount – individuals £10,600 (£10,600) (c) For expenditure from April 2002 accounting write downs Climate change levy is a single stage tax on supplies of various ries, but is reduced for capital contributions of up to £5,000. Annual exempt amount – trusts £5,300 (£5,300) (and not capital allowances) are allowable deductions for tax. fuels to industrial and commercial consumers. There is a diesel supplement of 3% for all bands, subject to a maxi- Entrepreneurs’ relief lifetime limit £10,000,000 £10,000,000) (d) Acquisition of mineral deposits and rights qualify for 10% p.a. mum charge of 35%. Entrepreneurs’ rate 10% (10%)
  7. 7. 12 A Guide to Budget 2012 A Guide to Budget 2012 13 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 Budget The Chancellor George Osborne confirmed during his Budget 2012 tax year – at a cost to the taxpayer of £1 billion, something that the officials refused to say if the 45p band for those earning over £150,000 will be 2012 briefing speech that the current 50p top tax rate will be cut to 45p from April 2013. previous government’s figures made no allowance for.’ merely ‘temporary. ’ Inheritance Tax matters Those earning £150,000 or more have Mr Osborne also argued that the The government will consult been subject to the 50% rate since April increase to 50p in 2010 raised about a Mr Osborne said that on legislation to increase the 2010, when it was brought in by the third of the £3 billion the government the 50p tax rate would Inheritance Tax (IHT) exempt Labour government. hoped it would raise, and cutting it to amount that a UK domiciled 45p would only cost the government only be justified if it individual can transfer to their Massive distortions £100 million. raised a significant non UK domiciled spouse or civil Mr Osborne said that the 50p tax partner. The government similarly rate would only be justified if it raised Scrapped altogether amount of money but proposes to allow individuals who a significant amount of money but There are currently around 300,000 evidence from HM are domiciled outside the UK and evidence from HM Revenue and Customs people in the UK who earn £150,000 who have a UK domiciled spouse or (HMRC) showed that the rate caused or more; of those 14,000 earn over £1 Revenue and Customs civil partner to elect to be treated Budget ‘massive distortions.’ million a year. (HMRC) showed as domiciled in the UK for the He said: ‘HMRC found that an It was widely predicted the tax would purposes of IHT. Legislation will be astonishing £16 billion of income was be reduced from 50p to 45p rather than that the rate caused in Finance Bill 2013. deliberately shifted into the previous being scrapped altogether but senior ‘massive distortions.’ 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.
  8. 8. 14 A Guide to Budget 2012 A Guide to Budget 2012 15 The amount of income that is not taxed will be frozen for those aged “Simplifying” the tax over 65, affecting the financial plans for those approaching retirement. system and spreading From April 2013, those reaching age 65 will no longer receive a higher personal allowance than people tax relief across everyone of working age. 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.