What might the 2013 budget hold?
In preparation of George Osborne’s budget speech on 20th March, our tax director Ruth Chapman has given her views on what to expect from the budget for owner managed businesses...
The main rate of Corporation Tax will reduce to 23% from 1st April 2013, and then reduce again to 21% from April 2014, bringing the main rate ever closer to the small company rate of 20% and eliminating the complications of marginal relief.
A temporary 2 year increase in the annual investment allowance from £25,000 to £250,000 has already taken place. This enables businesses to make investment into qualifying plant and machinery, and effectively obtain 100% tax relief.
The Government had hoped to introduce their General Anti Abuse Rule (GAAR) in the budget but we already know that this has been pushed back to Royal Assent of the Finance Bill 2013 at the earliest.
Although tax avoidance remains a controversial political issue, if the draft remains in its current format, non aggressive tax planning will not be caught by the GAAR, and this continues to be an area of interest for many business owners.
For income tax purposes, the personal allowance will increase to £9,440 for 2013/14. For higher rate taxpayers, some of this increase will be lost as there is to be a reduction in the basic rate threshold from £34,370 to £32,010, resulting in the higher rate of tax being charged on incomes in excess of £41,450.
The unwelcome 50% additional rate of tax will be reduced to 45% for incomes in excess of £150,000.
It was announced in the Autumn statement that the annual allowance for pension contributions would reduce from £50,000 to £40,000 from April 2013. Individuals with the ability to make further contributions to their pension schemes should consider doing so now, before the new annual allowance takes effect.
Capping of Income Tax Relief
Legislation is set to be introduced in Finance Bill 2013 to cap certain income tax reliefs available to individual. The cap is likely to be the higher of £50,000 or 25% of an individual’s income. For the business owner, this is likely to affect reliefs for trading losses and loan interest.
Prime Chartered Accountants are holding two free seminars following the budget in Solihull and Coventry, if you would like to attend please contact Prime today on 02476 518 555 or register your interest at www.primeevents.info