CHANCELLOR George Osborne’s Budget last week was billed as one to help working people, but what is its impact likely to be here in the Ribble Valley.
Below is a summary of the Budget and analysis of what it could mean to you, compiled by Alison Watson – a Chartered Tax Advisor and Chartered Accountant working for local firm Darbyshire & Co, which has offices in Clitheroe and Whalley
A Budget for Working People?
The Chancellor George Osborne delivered his budget last Wednesday March 21st. Most of the headlines (and political rows) have surrounded the so-called “Granny Tax”. However, there were a few other measures which are likely to affect the Ribble Valley and some of these are as follows:
Child benefit is to be phased out where anyone in the household has income over £50,000. The rate of reduction is to be £1 for every £100 income above the £50,000 limit. This is not as drastic as was widely publicised beforehand, but possibly Mr Osborne was mindful of the imminent major changes to tax credits, which are likely to leave many families on average incomes with less tax credits than currently.
These measures have been widely trailed in the press:
a) Increase in personal allowances from £8,105 (was £7,475) from April 2012 to £9,205 from April 2013.
b) Freezing of higher age personal allowances from April 2013 until this matches with the normal personal allowance.
c) Highest rate of income tax down to 45% (from 50%) from April 2013.
However, as well as the above, from April 2013, the basic rate band is to be reduced by £2,125 so that higher rate tax (40%) starts when total taxable income reaches £41,350 (currently £42,375). This is likely to hit quite a lot of people and, in some cases, will wipe out any gain from the increase in the Personal Allowance.
NATIONAL INSURANCE CONTRIBUTIONS
NICs did not get a run-out in last week’s Budget, as this had been announced in 2011, but NICs play an important role in overall taxation. From April 2012 Employees NIC primary rate is 12% and Employers NIC main rate is 13.8%. Main NICs begin at £7,605 (up from £7,225) but please note this remains below the Income Tax threshold of £8,105.
It would seem that Mr Osborne is no more of a friend to the company car driver than was Gordon Brown. The percentage on list price keeps increasing, so that more and more cars are being taxed at a higher percentage of their list price and in three years’ time the rate of increase will be faster still. The Benefit in Kind is set to increase on most cars by over 25% in the next five years – with cars between 75-100 CO2 emissions the rate of increase will be even higher. Car fuel benefit is also increasing as the amount on which it is calculated is rising (by 7.5%) in addition to the increase in percentage rates, so overall fuel benefit is set to rise by 13% from April in most cases.
With the lowering of the income limit at which higher rate tax takes effect, the increase in actual tax take is likely to be even higher. The only concession is that in four years’ time, diesel cars will no longer suffer the additional charge!
VAT registration limit increased to £77,000 from April 1st (currently £73,000). De-registration limit increased to £75,000 from April 1st (currently £75,000). From October 1st 2012, legislation to be brought in (details to come) to ensure hot/cold food served on supplier premises, sports drinks, holiday caravans and hairdresser chair rents are to be subject to VAT. As with many of the issues raised in the budget, the actual fine print is yet to be finalised.
Again widely trailed is that the main rate (profits above £1.5m.) reduces to 24% from April 1st 2012, then to 23% from April 1st 2013 and then to 22% from April 1st 2014. This will also affect the marginal rate (profits above £300,000 but below £1.5m.) as due to the decrease in the main rate, the marginal rate will reduce also.
As expected an end was announced to claims for enhanced capital allowances where no election has been made on transfer of a property. This will apply to all disposals post March 31st 2012. In addition, as previously advised there is a much reduced level of 100% allowances on new plant/machinery/fixtures acquisitions and the rate of ongoing allowances is also reduced from April 1st. Planning is particularly important for those with year-ends in the next two to three months to ensure maximum use is made of the existing more generous provisions.
Announced prior to the budget was that claims for working from home, which do not require supporting evidence of costs is to increased to £4 per week (currently £3 per week) from April 6th.
Mr Osborne also made reference to potential simplification to the tax system for small businesses. However, there are several issues (not always tax-related) which indicate that simplification may prove as difficult as sorting out the Greek Economy. Perhaps Mr Osborne might realise that “tax doesn’t have to be taxing” is really not that accurate a statement after all!
l Please note that the above information is only provided as a guide to the current changes and budget announcement. Some of the above items have certain qualifying criteria and it is to that extent that the information should not be relied upon without further advice.
For more about Darbyshire & Co’s full range of services visit the firm’s website at www.darbyshireco.com or contact its Clitheroe Office on 01200 438064 or Whalley office on 01254 823923.