Importantly this is our view of the budget and a summary of the main areas affecting small businesses. We welcome your comments, opinions and discussion. Please ensure that you confer with your tax advisor and accountant and we recommend that you speak with your accountant to ensure that you plan effectively for any possible savings or required changes to your administration systems and accounting fees.
No surprises for small businesses and a bit of a damp squib. The Chancellor, in our view, and as expected has not done enough to re-ignite much needed economic growth.
Corporation Tax Rates
Small company rate remains unchanged at 20%.
Drop from 24% to 23% is obviously welcome however this is not enough.
Simon Walker, Director of the IOD said “We should be aiming for a corporation tax rate of 15% by 2020 – that would put Britain in a very strong position“. He added that the Chancellor “had not done enough to free business from the burdens and barriers that are holding economic growth back” and said he would have to go “much further if he wants to fire up the engines of the economy“.
National Insurance Contributions
As a small business we were hoping for a reduction in Employers National Insurance and any ease of administration. Even though this was unlikely it was still a disappointment as savings could have been ploughed back into further employment and growth.
A full list is provided here: www.hmrc.gov.uk/budget2012/ootlar-rates.pdf
- Employer’s class 1 above £144/week not contracted out – 13.8%
- Self-employed class 4 from £7,605 to £42,475 per annum – 9%
- Self-employed class 4 additional rate above £42,475 per annum – 2%
- Self-employed class 2 – £2.65 per week
- Voluntary contributions class 3 – £13.25 per week
The personal allowance rates can be found here: www.hmrc.gov.uk/budget2012/ootlar-rates.pdf and an increase can only mean good news at least. We hope that this may provide a minor increase in consumer demand.
Speak to your accountant on the best combination of personal allowance salary and dividends for you if you are a director and owner/shareholder of a company.
Reduction of top rate tax of 50%
Reduction of the 50% tax rate to 45% for individuals earning taxable income above £150,000. The jury is still our whether this will aid growth by increasing inward investment into the UK or increasing the amount of income available to plough back into enterprise however, but the 50% tax rate has not improved the Government’s coffers significantly enough to have any impact on the budget deficit and it therefore can only be deemed to be a positive result.
The rates and thresholds of the main capital allowances will fall in 2012/2013 so if you are considering upgrading your equipment, plant & machinery, computers or property it may be advisable to move that forward to take into account the higher allowances in this tax year. Speak to your accountant for advice and calculations.
- Main pool: writing down allowance: 18% (2011/12 – 20%)
- Special rate pool: writing down allowance: 8% (2011/12 – 10%)
- Annual Investment Allowance (AIA) cap: £25,000 (2011/12 – £100,000)
Child Benefit Income Tax Charge
So much for reducing bureaucracy for companies, this is likely to be an administrative nightmare particularly for small companies. From 07-01-2013 there will be an income tax charge that effectively claws back child benefit for taxpayers with adjusted net income over £50,000 who receive Child Benefit. See www.hmrc.gov.uk/budget2012/cb-income-tax.htm
Currently £120,000 individual grant limit on share options an employee can acquire in a small to medium sized company under an EMI (Enterprise Management Incentives) scheme. This is expected to increase to £250,000 – dates to be announced subject to state aid approval.
New legislation regarding company pensions is due to be implemented in October and it is best to be prepared for this as an employer.
Disclaimer – Business Directory UK does not except any liability for any actions taken on the strength of our point of view or of this blog.