2012 Budget - Piper Hulse Commentary

21st March 2012

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Piper Hulse Commentary

Overall a neutral budget, with tax cuts funded by increases elsewhere, in which the key elements were widely signposted and talked about in the previous few weeks and in many cases past few years.

The cut in the 50% tax rate was widely expected given the global competitiveness of this rate and the lack of extra tax it has earned in practice with many wealthy avoiding this tax. The largest ever increase in personal allowances to £9,205 in April 2013 takes us close to the coalition’s long stated aim of a £10,000 limit – “one step away” says Danny Alexander; perhaps in April 2014.

Another reduction in the main rate of Corporation Tax to 24% from April 2012 and to 22% by 2014; this is an implementation of a previously announced intention. No changes in the smaller companies rate (20%).

Read on for the highlights I’ve selected and call me if you would like to discuss the impact on you and your business.

Tim Hulse

Director, Piper Hulse Accountancy & Business Advisory

21st March 2012

 

Individuals

  • Highest rate of Income tax cut to 45% from 50% from April 2013
  • Largest ever increase in Personal Allowances (PA) to £9,205 from April 2013. Already announced to increase to £8,105 from April 2012 (was £7,475 in 2011/12). However, as in the past, this comes with reductions in the other allowances;
    • The basic rate limit (BRL) will be decreased by £2,125, from £34,370 in 2012-13 to £32,245 in 2013-14
    • The higher rate threshold (HRT), which equals the sum of the PA and the BRL, will fall by £1,025, from £42,475 in 2012-13 to £41,450 in 2013-14.
  • Child Benefit reductions will come in at £50,000 individual income level (was £42,000) with a gradual taper until £60,000 income when there will be no Child Benefits.
  • Age related personal allowances to be phased out over time (need to see the small print here)
  • Automatic review of state pension age in line with longevity forecasts
  • Stamp Duty (Mansion Tax!)
    • Increase to 7% on properties over £2m from 22nd March 2012.
    • 15% on properties over £2m bought by Companies (was used to avoid stamp duty in the past)
    • Will use retrospective measures on Stamp Duty anti avoidance schemes
  • Will introduce general anti avoidance rules and legislate in the 2013 finance bill.

 

Business

  • Main rate reduces to 24% from April 2012 (an additional 1% to the 1% reduction already announced). Will reduce to 22% by April 2014
    • The Small Companies rate will remain at 20% for profits upto £300k
  • A simpler tax system for smaller firms with annual profits under £77,000 to pay tax under a cash based system. (Details to be announced)
  • Cutting taxes on Patents

 

Economy

  • A fiscally neutral budget; all savings are funded by increases elsewhere
    • Growth forecast: 0.8% in 2012, 2% in 2013 and 2.7% in 2014.
    • Inflation forecast: 2.8% in 2012, 1.9% in 2013
  • Unemployment to peak at 0.8% in 2012; 1.67m (claimants)
  • Annual budget deficit;
    • £126bn in 2011/12
    • £120bn in 2012/13 (excluding Royal Mail pension asset upside)
    • £98bn in 2013/14 reducing to
    • £21bn by 2016/17

 

Duties

  • Tobacco – up 37p from 6pm today
  • Alcohol – no changes
  • Fuel – no new announcements
  • Gambling – a new 20% duty on gaming machines
  • Gambling – a tax based on the place of consumption, not supply (currently many online gambling companies are based off shore).
  • Vehicle Excise Duty – to rise with inflation

 

Important Disclaimer

The Budget report is hot off the press this afternoon and the above commentary has been prepared on the same day with limited time to digest the news and check the accuracy and completeness. Please read the above in this context and you rely on the accuracy of the information at your own risk.

This material is published for the information purposes only. It provides only an overview of the information digested at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by Piper Hulse Limited.