Last Wednesday’s Autumn Statement set out the government’s economic policy for the next 12 months and outlined its longer term plans and aspirations.
Needless to say there weren’t too many surprises, especially for accountants, though the Chancellor did throw in the odd curved ball with measures like the scrapping of January’s fuel escalator increase. Mind you, his hands were tied to a large extent. He’s followed a policy of austerity rigidly, and obviously had no intention of backtracking or changing his mind, so in many ways the tone of the statement was already set. Were you a winner or a loser?
Well, here are the highlights of the Autumn Statement: we’ll let you be the judge of that.
- All basic rate tax payers:
Presently, the personal allowance is £8,105 and under original plans, it was set to increase to £9,205 in 2013/14. However the Chancellor announced that from April 2013 the personal allowance will instead increase to £9,440. This means basic rate tax payers, that is those with income under £41,450, will be better off by £267 in 2013/14 compared to 2012/13.
- All higher rate tax payers:
Needless to say, higher rate tax payers will also benefit from the increase in personal allowances next year; however, because the higher rate income threshold is set to fall they will only be better off by £62 in 2013/14.
- All higher rate tax payers:
What higher rate tax payers lost in terms of personal allowance increases, they will certainly make up for in other ways. In 2014/15 and 2015/16 the higher rate threshold for income tax will increase by 1% rather than inflation. In 2014/15 the threshold will therefore be £41,865 and in 2015/16 it will be £42,285.
- Business vehicle users:
The 3.02 pence per litre fuel escalator duty increase that was due to take effect on 1st January 2013 will be cancelled and the increase that was planned for 1st April 2013 will be deferred until 1 September 2013.
- Investors in business plant ad machinery:
The Annual Investment Allowance was slashed dramatically from £50,000 to just £25,000 in April 2012. However the Chancellor announced that the allowance will temporarily increase to £250,000 for a 2 year period commencing on 1st January 2013.
- Entrepreneurs operating from business premises:
The Government will extend the temporary doubling of the Small Business Rate Relief scheme in England for a further 12 months from 1st April 2013. Over half a million small businesses will benefit from this extension, with 350,000 not paying any business rates until April 2014, though rates reliefs are handled differently in Scotland, Wales and Northern Island.
- Small companies:
The Government is keen to show the UK is “open for business” and want it to be one of the most competitive tax systems in the world. As a result, they have announced a further decrease in the main rate of corporation tax from April 2014 to 21% this measure applies only companies with profits in excess of £300,000. Disappointingly, there was no comparable reduction for small companies with profits below £300,000: they will see their rate of corporation tax remain at 20% the foreseeable future.
- Pensions tax relief:
From 2014/15, the tax relief on pension contributions will be cut in two ways:
- the annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000
- the standard lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million
- Loss-making businesses:
From April 203 there will be a limit on certain income tax reliefs that were previously uncapped. This will include, amongst other things, the amount of trade losses that can be offset in a tax year. The cap on relief is £50,000 or 25% income in the year of offset which could be an earlier year if losses are carried back – whichever is higher. The original announcement in the Budget 2012 proposed that this cap would also apply to relief on charitable donations; however, this was quickly reversed. The Autumn Statement has reiterated that charitable donations will be exempt from this cap.
So some of you may have gained, and no doubt some of you look set to lose out. These things happen every year. Still, look on the bright side: it’s almost Christmas. So Steven Glicher accountants would like to wish you all a happy, healthy and prosperous Christmas and extend our very best wishes for the New Year.