Budget Summary 2012

I felt quite patriotic as we watched the Chancellor deliver a Budget Speech designed to encourage investment back into the UK. In today's post I will just provide you with the main points to take away from the speech however HMRC release detail notes, guidance and additions that were not mentioned in the speech itself. These get released tomorrow so Friday I will update the blog again to inform you of aspects such as pensions, SEIS and further tax reliefs mentioned in the proposed first draft of the legislation.

Main points to take away from the Budget Speech are as follows:

• From April 2013 Personal Allowance will be increased to £9,205
• The 50% tax rate is to be reduced to 45%
• Age Related Personal Allowance is to be phased away
• Child Benefit will be gradually tapered away for those that earn £50,000 at 1% deduction for every £100 over the limit, resulting in when someone earns £60,000they will not be entitled to child benefit
• Main rate of Corporation Tax to be reduced to 24%
• Stamp Duty Land Tax increased to 7% on properties valued at £2 million or over.
• Stamp Duty Land Tax charge of 15% on properties bought under a 'corporate envelope' i.e. a company
• Single Tier Pension of £140 to be brought in, consultation on this over the summer
• A general anti avoidance law to be brought in, consultation on this over the summer
• £50,000 capped amount of income tax relief available at 25% of overall income total. More details to follow on the guidance of this

The personal allowance increase is good but in reality you only will be getting around £20 pounds a month.  The phasing out of age allowance means middle tier pensioners will be hit harder as this will not keep up with inflation and the stamp duty land tax charges may see foreign suitors stop investing in UK attractive properties

As mentioned above before giving a detailed tax review I need to wait till HMRC release their budget guidance tomorrow.

Thank you for reading my blog and please feel free to pass it on !

Mitch the Tax Man

mitch@ljd.uk.com

50% Tax Rate To Go

The 50 per cent income tax rate looks set to be scrapped at a future date.

In BBC interviews, Vince Cable, the Business Secretary, conceded that the tax band was only a temporary measure and could well be dropped.

The Chancellor, George Osborne has already instigated a review of the 50% tax rate, which applies to those earning more than £150,000 a year, a move that indicates the Treasury may be ready to abandon the band as soon as 2013.

Vince Cable told the BBC: "I and George Osborne agree that we have to move away from extremely high marginal rates of tax on income, including that the 50p rate of tax.

"It moved up to 50p in an emergency because we had to have a sense of solidarity that everybody was bearing some of the pain, and the chancellor said in the budget that we're going to have to move away from that. I agree with him."

To offset the loss of the top rate of income tax, Dr Cable suggested the Government may turn its attention to a higher property levy.

He continued: "But it needs to be a change which is fair overall and does take account of the fact that the wealthy have got to pay their share. The emphasis may well have to shift from high marginal rates of tax on income which are undesirable, to taxation of wealth, including property, and the chancellor said as much as that in his Budget."

In a separate interview, the Deputy Prime Minister, Nick Clegg, said that any move would not necessarily mean a return to the Liberal Democrats' proposed mansion tax but could involve a review of council tax or stamp

Whilst this is good news for the higher earners on the one hand, on the other the government will almost definitely find a seperate way to tax them !

Tax planning will be key so please feel free to contact me mitch@ljd.uk.com

The 2011 Budget

"This is not a tax raising budget, neither rising tax not offering give a ways" These were the words used by Chancellor George Osborne as he began his 2011 Budget address. I have to say I was impressed by the way the Chancellor came across as I feel he delivered a promising and fair Budget. In today's post I will highlight 5 key Tax areas that I feel were the most interesting from a tax point of view.

1. The merger of Tax and National Insurance
As I correctly predicted in yesterday's post, the Chancellor stated that "It is time that we take this historic step to simplify our tax system and make it fit for the modern age be merging Tax and National Insurance”. However you will not see this implemented for a number of years but the government will be setting up a consultation unit to implement this.

2. Further Reduction of Corporation Tax
The Higher Rate of Corporation Tax is to be reduced by 2% from April 2011 reducing the rate to 26%. The small and marginal rates are being reduced by 1%

3. Residency/Non Domicile
As predicted in yesterday's post, HMRC will be introducing a statutory residency test. They have not yet produced details on this yet but I will report back in June when details are published. Furthermore if you have been residence for 12 years in the UK but are not domiciled then you could be subject to an increased Remittance Base Charge of £50,000 increased from £30,000.

4. Personal Allowance Increased
Previously, the government announced income tax changes in April 2011, with the personal allowance - the point at which income tax starts to be paid - rising to £7,475. This will go up by another £630 in 2012.

5. EIS & VCT Investment Rules Relaxed
The Chancellor has increased the tax relief on enterprise investment schemes (EIS) from 20% to 30% and relaxed the investment rules for both EISs and venture capital trusts (VCTs).The total amount that can be invested by a VCT or EIS into an individual company will be increased to £10 million from £1 million

There were of course many items discussed in the Budget but I have decided just to make a mention a few that I found interesting. The main item that has got people speaking is the merger of Tax and National Insurance. I believe this is a good idea however it may be near impossible to implement. We shall see what happens.

For a full budget debrief please email me mitch@ljd.uk.com

Predictions for The Budget Tomorrow

Chancellor George Osborne delivers his Budget speech tomorrow with many tax commentators believing there is not much room for manoeuvre bearing in mind the current financial position of the UK. However I diasagree with the commentators and predict that there will be changes as indicated by the Office of Tax Simplification early this year.

I fully believe there is a strong chance that Tax and National Insurance could be merged. This would potentially mean tax savings as you would only have to pay Tax and no National Insurance. The government set up the Office for Tax Simplification (OTS) last year and it is expected that some concrete steps towards streamlining the tax system will be put in place and I believe this is one of them.

Furthermore I am predicting the following 5 items to appear in tomorrow’s budget:

1. IR35 - I believe partnerships will be targeted as HMRC look to clamp down on further 'disguised employments' to avoid rising National Insurance costs

2. Non Domicile/Non Residents - With no concrete rules in place to determine ones residency surely now they must introduce a statutory test!

3. NIC on benefits - an increase of NIC on benefits in kind

4. Stamp Duty - Possibly further anti avoidance legislation to be introduced

5. Inheritance Tax Squeeze - This has already been documented by the OTS as they reported "On the basis of the low number of estates caught by IHT and the useful but relatively low revenues [after reliefs] that it raises, we consider that a more appropriate approach may be to review the whole of IHT rather than to consider individual IHT reliefs"

Overall I believe this year’s budget could see the biggest tax changes we have seen for the past few years and I will be summarising all the key points in tomorrow’s blog.

Please feel free to contact me with any questions mitch@ljd.uk.com