But the Chancellor did announce bold moves on taxation and there was plenty on how to revive the British economy. And that was the dominant theme of this Budget – how can the government get the economy growing? We want to hear the word growth, not the tired word austerity! To this end, the Chancellor announced a number of measures that are likely to be welcomed by the business community. Reductions in Corporation Tax should please larger businesses, along with simplifications to the VAT system. A simplification of the tax system for smaller businesses was announced which should make the completion of tax returns simpler for up to 3 million businesses with a turnover of up to £77,000. As rumoured earlier this week, the Chancellor has announced a significant increase to the income tax personal allowance which will rise by £1100 to £9205 in April 2013, the largest ever increase. The 50p Additional Rate, which you may remember last year George Osborne referred to as a “temporary tax”, has been reduced to 45p, as was widely anticipated. The Chancellor also addressed the issue of fairness surrounding the proposal to remove Child Benefit from higher rate tax paying families, announcing today a Child Benefit income tax charge. The charge will be applied to taxpayers whose income exceeds £50,000 in a tax year and who are in receipt of Child Benefit. For taxpayers with income above £60,000, the amount of the charge will equal the amount of Child Benefit received. Importantly, the amount of Child Benefit payable will be unaffected by the new tax charge. The following is a comprehensive summary of the key items that will impact on payroll and general business activity. It includes text that HMRC has provided under the section Individuals - Personal Tax, Tax Credits, Child Benefits . Please note that the full document spans 144 pages so only the key paragraphs are shown below. The Policy Team will be providing a webcast of this content on 22 March; free to CIPP members of course. From all at the CIPP Policy team; Happy Reading! Main Budget Summary New tax changes announced in Budget 2012 to be included in the 2012 Finance Bill Income tax rates and Allowances 2012-13 and 2013-14 As announced at Budget 2011, the income tax allowance for those aged under 65 will increase by £630 in cash terms to £8,105 in 2012-13. There will be a corresponding £630 cash decrease in the basic rate limit, taking it to £34,370. The higher rate threshold, which equals the sum of the personal allowance and the basic rate limit, will therefore remain unchanged in 2012-13 at £42,475. For 2013-14, the main rates of income tax will be the 20 per cent basic rate, the 40 per cent higher rate and the additional rate will be reduced from 50% in 2012/13 to 45%. For 2013-14 the personal allowance for those aged under 65 will be set at £9,205 and the basic rate limit at £32,245. The Class 1 Upper Earnings Limit and the Class 4 Upper Profits Limit for National Insurance contributions will be aligned with the point at which the higher rate tax becomes payable (£41,450). From 2013-14, the availability of the "age-related" income tax personal allowances will be restricted. The allowance of £10,500 for 2012-13, available to people aged 65 to 74 will be restricted to people born after 5 April 1938 but before 6 April 1948. The allowance of £10,660 for 2012-13, available to people aged 75 and over will be restricted to people born before 6 April 1938.
CIPP Policy News Journal
09/10/2012, Page 103 of 234
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