Budget 2013 - Key Points
Posted on 20 March 2013
The Chancellor of the Exchequer George Osborne has unveiled his Budget for 2013. We list below the key points of the Government's 2013 Budget:
The individual personal allowance will rise to £9,440 in April this year and will be increased to £10,000 in April 2014.
The current nil rate band of £325,000 will be frozen until April 2018. This is the amount any individual can give away on death or to a discretionary trust, without IHT becoming payable.
Beer duty has been reduced by 1p and the beer duty escalator has been scrapped.
The increase in fuel duty which was planned for 1 September 2013 has been cancelled. Fuel Duty will remain at the current level.
A new Help to Buy scheme will be introduced to encourage the housing market and construction industry. In the first part of the scheme, £3.5 billion will be provided for shared equity loans to provide 20% of the purchase price for any buyer of a newly built property, up to a value of £600,000. The buyer must be able to provide at least 5% of the purchase price. This scheme will start from 1 April 2013.
The second part of the scheme, to run from January 2014, will provide a mortgage guarantee for those who wish to buy new or old properties and can provide a 5% deposit.
Cost of Care
Changes from 2016/17 are intended to ensure that the nursing element of residential care home fees in excess of £72,000 will be provided by the state and the means testing for individuals for residential care will not apply unless their savings exceed £118,000. The fine details of these changes have yet to be confirmed and agreed. The cost of these reforms is to be paid for from the increase in NICs payable by employers on the abolition of contracting out for members of defined occupational pension schemes and also from the freezing of the IHT nil rate band at its current level.
Child Care Costs
A new scheme for child care costs will be introduced in the autumn of 2016.
At present if you are in receipt of tax credits and both parents work more than 16 hours a week, you can get up to 70% of your child care costs paid by the government. If you are not in receipt of tax credits, you can use the Employer Supported Child Care scheme, if your employer is engaged with this. Only 5% of employers currently support this scheme. The intended new measures will be put to consultation and the aim is to phase in a new scheme from the autumn of 2016, firstly for those children under 5 years and thereafter extending to older children. This will be a new voucher scheme which will provide funding to cover 20% of the first £6,000 per annum for each child (to a maximum of £1,200 per child per year) and an increase in child care support.
Flat rate Pension
From 2016/17 there will be a flat rate pension for all of £144 per week. There will no longer be the option to contract out and all will pay the same level of NICs. This will bring in more income in NIC’s but it is anticipated that many will be better off and it is said that the system will be simplified going forward.
Changes announced in previous budgets will come into force in April this year, including the Universal Credit and the Household Benefits Cap. A new allowance (the Personal Independence Payment) for those previously in receipt of Disability Living Allowance will be introduced and there will be an uprating of a range of benefits by 1% for each of the next three years.
Information exchange agreements with the Isle of Man, Jersey and Guernsey will are aimed at recovering tax which otherwise would have gone unpaid; rules will be brought in to counteract tax planning with partnerships, offshore employment arrangements and the General Anti Abuse Rule will be implemented. The government intends to ‘name and shame’ promoters of tax avoidance schemes.
The Chancellor announced that this spring there will be a consultation document on the taxation of partnerships which will concern measures to:
- remove the presumption of self-employment for limited liability partnership (LLP) partners, to tackle the disguising of employment relationships through LLPs; and
- counter the artificial allocation of profits to partners (in both LLPs and other partnerships) to achieve a tax advantage.
It is understood that the consultation document will include draft legislation to be introduced in the Finance Bill 2014. This means that all professional firms will need to review their structures and internal arrangements. There are some other tax changes that have immediate effect that may affect partnerships and LLPs with corporates in their structure.
This will decrease to 21% from 2014 and to 20% from 2015, when the marginal rate will be abolished as well. The reduced rate will be offset by an increase in the Bank Levy to 0.142%.
A new ‘Employment Allowance’ will be introduced from April 2014, whereby the employer will not have to pay the first £2,000 of employer’s NICs. The chancellor said that 450,000 employers will not pay any employer’s NICs at all as a result. This will apply to all businesses and charities.
The Seed Enterprise Investment Scheme
This scheme was launched in 2012 and allows a 50% income tax relief on investments made into small early stage companies. There will now be a limited extension of the capital gains tax ‘holiday’ so that any investors making gains in 2013/14 will receive a 50% capital gains tax relief when they re invest their gains into SEED companies in either 2013 or 2014.
Employee share schemes
Legislation will introduce a new employee shareholder status to give staff a stake in their firm’s future success. The first £2000 of share value given to an employee under the new scheme will be free of income tax and national insurance contributions. There will be no capital gains tax on up to £50,000 of the sale proceeds of such shares.
In addition, a new capital gains tax relief will be introduced on the sale of a controlling interest in a business to an employee ownership structure.
Loans made to staff for car parking permits will be tax free, to encourage commuting.
Annual Investment Allowance and Small business rates
The new level of Investment Allowance of £250,000 will be extended for a period of two years from January 2013.
The current doubling of the Small Business Rate Relief will be extended for a period of 12 months from April 2013, but will be reviewed again in the autumn budget.
Research & Development relief and Patents Income
R & D relief will increase to 10% and the corporation tax on patents income will reduce to 10% to encourage innovation business in the UK.
Stamp Duty on share transactions
Stamp duty on transactions of shares in companies listed on the growth markets such as the Alternative Investment Market and the ISDX Growth market will be abolished in April 2014.
There will be new Decommissioning Relief as part of the overall aim to encourage and allow innovation in new sources of low cost energy such as Shale Gas.
Some further exemptions from the climate change levy will be brought in to assist eg ceramic businesses.
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