a guide to the budget 2013

7/28/2019 A Guide to the Budget 2013

1/16

THEBUDGET2013


2/16


3/16A GUIDE TO THE BUDGET 2013

BUDGET 2013

A GUIDE TO THE BUDGET 2013 03

Chancellor George Osborne delivered the ourthcoalition Budget to Parliament on Wednesday20 March 2013. He has cut his o cial growthorecast in hal , but insisted the UK would avoid atriple dip recession. Growth he said in 2013 wouldbe 0.6 per cent - hal the 1.2 per cent he predictedour months ago in his Autumn statement.

He used Budget 2013 to announcea cut in the corporation tax rateby 1 per cent to 20 per cent, andcancelled this autumns planneduel duty rise. He also ended aboveinfation alcohol duty rises and cutthe price o a pint o beer by 1p.

Mr Osborne said his Budgetwas or those who want to workand get on. He said it was takinglonger than expected but weare, slowly but surely, xing ourcountrys economic problems.

His revised orecast is or theUKs national debt to rise to 85 percent o GDP and not start coming down until 2017/18

- a year later than previously predicted.But the Chancellor predicted the de cit would

continue to come down thanks to the many tough

decisions taken by the Government. He saidthe de cit had allen rom 11.2 per cent o GDP in2009/10, to a orecast o 7.4 per cent this year - a allo a third.

He announced that the Bank o England MonetaryPolicy Committee had also been given an updatedbroader remit, but keeps its 2 per cent infation target.

The Chancellor extended the 1per cent public sector pay cap byone year to 2015/16.

He unveiled a ra t o measuresaimed at boosting new businesses,including tax credits or research,and new measures to clampdown on tax avoidance. And heannounced plans to extend shared-equity schemes to help people geton the housing ladder and plansto encourage more a ordablehomes to be built.

The Chancellor announced2.5bn o spending on

in rastructure paid or by urther cuts on public

spending. Details o where these cuts will occurcome in June when the Government unveils itsspending review.

wHaT THE CHaNCEllOr HaD TO Say

THE CHaNCEllOraNNOUNCED 2.5BN

Of SpENDING ONINfraSTrUCTUrE paIDfOr By fUrTHEr CUTSON pUBlIC SpENDING.

DETaIlS Of wHErETHESE CUTS wIll OCCUrCOmE IN JUNE wHEN THE

GOvErNmENT UNvEIlS ITSSpENDING rEvIEw.

wHaT DOESBUDGET2013 mEaNfOr yOU?

Whether youre anemployer, a businessperson, in thepublic sector or anindividual wonderinghow you are a ected,our analysis andinsight can help shedlight on the Budgetmeasures. To discussthe impact on yournancial plans,

please contact us orurther in ormation.


4/16

A GUIDE TO THE BUDGET 201304

BUDGET2013 aTa GlaNCETHE kEy aNNOUNCEmENTS frOm THECHaNCEllOrS fOUrTH BUDGET SpEECH



5/16


ECONOmyn Growth orecast or 2013 halved to 0.6% - down

rom the 1.2 per cent orecastn O ce or Budget Responsibility watchdog

predicts UK will escape recession this yearn Growth predicted to be 1.8 per cent in 2014; 2.3

per cent in 2015; 2.7 per cent in 2016 and 2.8 percent in 2017

INflaTIONn 2 per cent Bank o England infation target

to stay in placen Bank remit to be changed to ocus on growth aswell as infation

BOrrOwINGn Borrowing o 114bn this year, up rom previous

108bn orecastn Borrowing set to all to 108bn, 97bn and 87bn,

61bn and 42bn in subsequent yearsn Borrowing as share o GDP to all rom 7.4 per

cent in 2013/14 to 5 per cent in 2015/16n Debt as a share o GDP to increase rom 75.9 per

cent in 2012/13 to 85.6 per cent in 2016/17

SpENDING aND payn Most Government departments to see budgets

cut by 1 per cent in each o next two yearsn Schools and NHS will be protectedn 11.5bn in urther cuts earmarked

in 2015/16 Spending Review, up rom 10bnn 1 per cent cap on public sector pay extended to

2015/16 and limits on progression pay rises inthe sector

n Military to be exempt rom progressionpay limits.

n Proceeds o Libor banking nes to be given to goodmilitary causes, including Combat Stress charity

INCOmE Taxn Limit at which people start paying tax to be raised

to 10,000 in 2014 - a year earlier than planned

TraNSpOrT aND INfraSTrUCTUrEn An extra 15bn or new road, rail and

construction projects by 2020, starting with3bn in 2015/16

JOBSn 600,000 more jobs expected this year than at

same time last yearn Claimant count to all by 60,000

pENSIONErSn Single fat-rate pension o 144 a week brought

orward a year to 2016n Cap on social care costs con rmed

BUSINESSn Corporation tax to be cut by 1 per cent to

20 per cent in 2015n New employment allowance to cut National

Insurance bills by 2,000 or every rmn 450,000 small rms will pay no employer

National Insurancen Government procurement rom small rmsto rise ve old

n Tax relie or investment in social enterprisesn Stamp duty axed on shares traded on growth

markets like AIMn Tax avoidance and evasion measures, including

agreements with Isle o Man, Guernsey andJersey, aimed at recouping 3bn in unpaid taxes

HOUSINGn Shared equity schemes extended, with interest-

ree loans or homebuyers up to 20 per cent o value o new-build properties

n Bank guarantees to underpin 130bn o newmortgage lending or three years rom 2014

ENErGy aND THE ENvIrONmENTn Tax incentives or ultra

low-emission carsn Pottery industry in Midlands to be exempt rom

climate change levyn Tax allowances or investment in

shale gas

famIlIESn 20 per cent tax relie on childcare up to 6,000per child rom 2015

n 5,000 payments or those who lost money onEquitable Li e policies bought be ore 1992.

n Extra money or those on low incomes

fUEl, alCOHOl aND CIGarETTESn Septembers 3p uel duty rise scrappedn Aprils 3p rise in beer duty scrapped. Instead,

beer duty to be cut by 1pn Annual infation +2 per cent rise in

beer duty to be ended but duty escalator toremain in place or wine, cider and spirits

n Cigarette duties unchanged - continuing to riseby infation +5 per cent



Whether youre anemployer, a businessperson, in thepublic sector or anindividual wonderinghow you are a ected,our analysis andinsight can help shedlight on the Budgetmeasures. To discussthe impact on yournancial plans,please contact us orurther in ormation.


6/16


INCOmE Tax pErSONal

allOwaNCE INCrEaSEThe personal allowance or income tax the amountyou can earn tax- ree be ore basic-rate 20 per centincome tax commences will beraised to 10,000 in April 2014.

For the rst time higher incometaxpayers will bene t more thanlower earners rom the personalallowance increase. The pointat which people will start payinghigher-rate income tax will belowered to 41,865 in April 2014, asthe personal allowance increasesto 10,000. This will mean a bene tto higher rate tax payers o 83.

Workers who earn more than 100,000 will losetheir personal allowance at a tapering rate o 1 loss

o allowance or every 2 earned - meaning in April2014, i you have a wage o 120,000 - 100,000

plus twice the personal allowance - youwill be taxed on all o your income.

The personal allowance or incometax will be increased to 10,000 andthe 10 per cent band (applicable tosavers and investors only) on therst 2,000 o taxable income willbe reduced to 0 per cent, e ectivelymaking the personal allowance12,000 or some people.

Nearly everyone who lives in the UKis entitled to an income tax personal

allowance. This is the amount o income you canreceive each year without having to pay tax on it.

THE amOUNT yOU CaN EarN Tax-frEE BEfOrEBaSIC-raTE 20 pEr CENT INCOmE Tax COmmENCES

fOr THE fIrST TImEHIGHEr INCOmETaxpayErS wIll

BENEfIT mOrE THaNlOwEr EarNErS

frOm THE pErSONalallOwaNCE INCrEaSE.


wEalTHCrEaTION TIpRaising the personalincome tax allowanceto 10,000 rom April2014 is positive newsor pension savers.Pensions are one o the most tax-e cientsavings vehiclesavailable but thesee ciencies are not

just limited to tax-relie on pensionssavings. I a marriedcouple are able toequalise their pensionpots, signi cantamounts o moneycould potentially besaved in retirement byusing both personal

allowances, which willbe worth 10,000 each.

2012/13 2013/14 2014/15

Personal allowance 8,105 9,440 10,000

Basic rate o tax limit 34,370 32,010 31,865

Higher rate o tax threshold 42,475 41,450 41,865


7/16


8/16


9/16


fIrST-TImE HOmE BUyErSA Help to Buy scheme was announced.It will o er up to 3.5bn or shared equityloans towards mortgages.

Buyers who put up a 5 per centdeposit can get another 20 per centrom the Government. This loan will beinterest- ree or the rst ve years. There

will be a ceiling o 600,000 on thevalue o properties bought.

A Mortgage Guarantee scheme willbe made available rom January, and willincentivise lenders to give those withsmaller deposits better mortgages.There will be guarantees to back 130bno mortgages.

The Government will guarantee 20per cent o the loan. Again, it will onlybe usable on properties worth up to600,000. I a borrowers property isrepossessed, the Government will covera proportion o the losses su ered bylenders.

BaSIC-raTE TaxpayErSThe personal allowance - the amountyou can earn tax- ree be ore basic-rateincome tax commences - will be raisedto 10,000 rom April 2014.

It ollows several years o rises. Forunder-65s it was put up by 630 in thecurrent tax year to 8,105 and is due toleap again to 9,440 next month - or thenew tax year.

HIGHEr-raTE TaxpayErSMr Osborne made no mention o it inhis speech but it looks like higher-ratetaxpayers will also bene t rom the risein the personal allowance.

Previous rises have been o set bychanging the level at which the 40 percent income tax rate commences. Itwill all rom 42,475 or this tax year to41,450 next year but will rise to 41,865in 2014.

BEEr DrINkErSThe alcohol duty escalator, introducedby Labour and so ar retained by theCoalition, was scrapped on beer andduty was cut by 1p.

CHIlD SavErSSix million holders o child trust unds

(CTFs) will be allowed to switch theirmoney into the newer Junior IndividualSavings Accounts (JISAs), which o erbetter rates and cheaper investments.

The decision means those childsavings will be able to get access toa best buy account paying 6 per centinterest rather than 3.05 per cent andindex tracker unds that cost 0.27 percent a year instead o the more typical1.5 per cent on CTFs.

parENTS wITH CHIlDrEN INfUll-TImE CHIlD CarEA new system o tax breaks was outlinedahead o the Budget. In 2015, theexisting scheme o child care voucherswill be replaced with a tax break o 20per cent on nursery costs up to 6,000a year. The di erence with the existingsystem is that higher-rate taxpayers getno additional bene t and that it excludesstay-at-home mothers. It is also paidper child. Those with more children and

using child care a lot will get the mostbene t.

mOTOrISTSThe escalator due to increase uel dutyagain in September has been waived. TheChancellor said that petrol and diesel wasnow 13p per litre cheaper than it wouldhave been i the escalator had beenen orced over the past two years.

The previous Labour Governmentscheduled annual infation-plus-1 per

cent rises until 2014. But Mr Osborne

cut 1p rom uel duty in the March 2011Budget and announced in June last yearthat the rise due in August would be puto until the start o 2013. Once again,that 3p rise was postponed.

INvESTOrS IN Small COmpaNIESStamp duty on buying shares on

growth markets, such as the junior AIMmarket, will be abolished. The duty isnormally payable at 0.5 per cent whenbuying shares.

THOSE wHO rEaCH STaTEpENSION aGE IN 2016Anyone who reaches state pension agebetween April 2016 and April 2017 willnow bene t rom the new single-tierstate pension. Previously it was due in2017, so these people would previously

have missed out. Anyone who wouldhave received just the basic statepension, currently 107.45 a week, willgain by quali ying or the 144 fat ratestate pension.

Some would already have got thatamount rom the top-up state pension;they will not lose any bene ts alreadyaccrued but will miss one year o extratop-up.

EqUITaBlE lIfE vICTImSVictims o the collapse o EquitableLi e who had previously been deniedcompensation will now receive 5,000.Those on lower incomes will get 10,000.

The Chancellor described thepayments as ex gratia, saying theGovernment was under no obligationto make them but was doing the rightthing. The recipients will be those whobought with-pro ts annuities be ore1992. The 10,000 payments will bemade to those who receive pensioncredit, a means-tested bene t.

BUDGET 2013 wINNErS



10/16



Tax avOIDaNCESCHEmES TarGETEDAs part o broad and sweeping moves to clampdown on avoidance, the Government hasannounced it is to consult on new proposalsto target the very promoters o some o themost aggressive schemes. The new moves,

announced in the Budget2013 will see the Governmentapproach this by tackling boththe supply and demand o these schemes.

In the last year, scores o celebrities and well known sportsstars have hit the headlines orbeing caught up in avoidanceschemes such as the EclipseFilm Partnership scheme inwhich ex-England coach Sven

Goran Eriksson and ManchesterUnited boss Sir Alex Ferguson both invested. Theschemes were promoted by aggressive tax advisorycompanies. Several who were caught up in the

schemes claimed they were victims o mis-selling.HMRC is to shortly begin consultation on new

naming and shaming proposals alongside a rangeo targeted disclosure requirements and penalties.

As part o the clampdown, consultation will

also begin on new powers totake tougher action againsthigh risk promoters o taxavoidance schemes, includingnew in ormation and penaltypowers, and the possible useo naming and shaming, HMTreasury con irmed.

Announcing the moves, GeorgeOsborne said: We will nameand shame the promoters o taxavoidance schemes. My message

to those who make a livingadvising other people how aggressively to avoidtheir taxes is: this Government is not going to letyou get away with it.

NamING aND SHamING

HmrC IS TO SHOrTly BEGINCONSUlTaTION ON NEwNamING aND SHamINGprOpOSalS alONGSIDEa raNGE Of TarGETED

DISClOSUrE rEqUIrEmENTSaND pENalTIES.


Whether youre anemployer, a businessperson, in thepublic sector or anindividual wonderinghow you are a ected,our analysis andinsight can help shedlight on the Budgetmeasures. To discussthe impact on yournancial plans,please contact us orurther in ormation.

In the last year avoidance schemeshave hit the headlines such as the

Eclipse Film Partnership scheme.


11/16



r&D aBOvE THElINE Tax rElIEfINCrEaSEDA number o new and uprated taxrelie s or business were announcedin the Budget 2013, including theextension o above the line R&D taxrelie s. Mr Osborne con rmed that theabove the line credit will be increasedto 10 per cent rom 1 April 2013.

The above the line (ABL) R&Dtax credit, or large company R&Dexpenditure incurred on or a ter 1 April2013, rst announced in 2011, hasbeen extended with the introductiono an ATL credit.

The ATL credit is designed tomake R&D relie more visible tothose making investment decisionsand improve cash low to companies

with no corporation tax liability,according to the Red Book,although some question whether itimpacts any but the largest sectoro the business market. The newmeasure increases the ATL creditto a rate o 10 per cent be ore tax.Companies with no corporationtax liability will be able to claima payable credit. The ATL creditwill be introduced alongside theexisting super-deduction in April2013, and will ully replace the

super-deduction in April 2016.The estimated cost o the

measure is 80m in 2014/15, uprom 20m in 2013/14.

NEw aND UpraTED Tax rElIEfS fOr BUSINESS

NaTIONal INSUraNCEpaymENTS CUT

Every company in the UK is to get the rst 2,000taken o their National Insurance (NI) bill in anattempt to boost job creation. Aimed at small rms,

George Osborne said that when the change startsnext April, one third o all employers will nothave to make any NI payments.

NI payments go towards a number o bene ts, including the state pension. Thechange is being called the EmploymentAllowance, which the Chancellor described asa tax o jobs.

For an individual whos set up their ownbusiness, and is thinking about taking on their rstemployee, a huge barrier will be removed. Theycan hire someone on 22,000, or our people on

the minimum wage, and pay no jobs tax.The Employment Allowance will also apply tocharities and community sports clubs.

aN aTTEmpT TO BOOST JOB CrEaTION

The ATL credit is designed to makeR&D relief more visible to those

making investment decisions and improve cashflow to companies with

no corporation tax liability.


12/16



TO maxImISE pENSION SavINGSBEfOrE THE Tax yEar ENDNOw THaT THE BUDGET HaS BEEN aNNOUNCED, pEOplE HavECErTaINTy OvEr THE Tax SavING OppOrTUNITIES avaIlaBlE

5 pOSTBUDGETSTEpS


13/16



Following the Budget 2013 you need to maximiseon tax relie when saving or your long-term uture.A pension remains one o the most tax-e cientsavings vehicles, and you should act ast to ensurethat you maximise your pension savings be orethe tax year end. Utilising pension input periodscan make a big di erence to pension planning,and ollowing the ve tips below will help ensureyou get the most rom yourpension savings.

1. UNDErSTaND pENSIONINpUT pErIODSPensions do not necessarilyoperate in sync with tax yearend periods. Each pension willhave a pension input period,which commences the rst datethe rst contribution is made,and usually lasts or 12 months.It is the end date o a pensioninput period that will determine which year theAnnual Allowance is tested against.

2. maxImISE CONTrIBUTIONSfOr THE CUrrENT Tax yEar fIrSTUnderstanding when a pension input period endswill enable people to maximise their 2012/13Annual Allowance in time. This may be earlier thenthe 5th April 2013.

3. OpEN a NEw pENSION If THE INpUTpErIOD HaS alrEaDy ENDEDPeople looking to top-up their pension in thecurrent tax year, who discover they have alreadymissed their pension input period or the currenttax year, need not despair. They can open a newpension account in the current tax year to solvethis problem. People will need to ensure theyinstruct their provider to close the initial inputperiod o the new account by 5 April 2013 toensure the contribution is set against the AnnualAllowance or this tax year.

4. UTIlISE UNUSED allOwaNCES fOr THEprEvIOUS THrEE yEarS, aND OpEN aNEw pENSION If THE INpUT pErIOD HaSalrEaDy ENDEDOnce someone has ully utilised theallowance in the current tax year, theycan utilise any unused allowances rom

the previous three tax years. Any unusedallowance rom the urthest year is used irst(so three years ago). I the input period inthe current tax year has already passed, it isimportant to open another pension account,and ask or it to close on 5 April 2013, inorder to still make a contribution in respecto unused allowance rom 3 years ago. I

another pension is notopened in time, this unusedallowance will be lostorever, potentially losing

up to 25,000 o tax relie or a 50 per c ent tax payer.

I someone does not knowwhen their input period ends,a situation could occur wheresomeone believes they aremaking a contribution whichutilises an unused allowancerom three year earlier, whenin act the input period has

passed. This will result in an overpayment, whichdoes not attract tax relie (and the contribution will

not be returned, it will remain in the pension und).

5. USE pENSION INpUT pErIODSTO aCHIEvE 50 pEr CENT TaxrElIEf ON CONTrIBUTIONS fOrTHE 2013/14 Tax yEarManipulating pension input periods cancreate an opportunity or additional rate taxpayers to still get 50 per cent tax relie on anycontributions or the 2013/14 tax year. Thiscan be achieved by closing a pension input

period in the current tax year, and starting anew input period ahead o the next tax year.Contributions made this tax year will stillreceive tax relie at 50 per cent, as tax relie is granted in the tax year the contribution ismade even though the contribution is testedagainst next years Annual Allowance. Anextra 5 per cent in tax relie could equate toan extra 2,500 on the maximum 50,000Annual Allowance available.

There are restrictions in place regardingthe shortening o pension input periods, and

someone can only have one input periodending per tax year within an arrangement. It isthere ore important that pro essional nancialadvice is sought to ully bene t rom thefexibility that the legislation provides.

UNDErSTaNDINGwHEN a pENSION

INpUT pErIOD ENDSwIll ENaBlE pEOplE TOmaxImISE THEIr 2012/13

aNNUal allOwaNCEIN TImE. THIS may BE

EarlIEr THENTHE 5TH aprIl 2013.

wHaT DOESBUDGET2013 mEaNfOr yOU?Whether youre anemployer, a businessperson, in thepublic sector or anindividual wonderinghow you are a ected,our analysis andinsight can help shedlight on the Budgetmeasures. To discussthe impact on yournancial plans,please contact us orurther in ormation.


14/16


15/16



STamp DUTyON SHarESaBOlISHED ON aImThe Government is to abolish thestamp duty it charges on shareson markets suchas AIM, consideredgrowth markets.

The news,announced byChancellor GeorgeOsborne as part o a ra t o measuresto make Britain

business- riendly,comes in addition tothe Governmentsconsultation on extending IndividualSavings Account (ISA) eligibility to awider range o small company shares.

Many observers o the Britishtax system complain that is has

long biased debtnancing over equityinvestment. So todayI am abolishingaltogether stamp dutyon shares graded ongrowth markets.

From April nextyear, this will

directly bene ithundreds o medium-sized UK

irms, lowering their cost o capitaland supporting jobs and growthacross the UK, said Osborne.

ElIGIBIlITy TO a wIDEr raNGE Of Small COmpaNy SHarES

THE GOvErNmENTIS TO aBOlISH THE

STamp DUTy ITCHarGES ON SHarES

ON markETS SUCHaS aIm, CONSIDErEDGrOwTH markETS.

BUDGET 2013BrIEfING

mISUSE Of THEparTNErSHIp rUlES

The Budget 2013 announcement to reducethe headline corporation tax rate to 20 percent rom 2015 makes the UK corporation taxrate the lowest in the G8 and delivers onesingle headline rate. This is the th time theChancellor has cut the rate and 20 per centseems a likely landing point or this Parliament.

The cut sends a clear signal to businessand investors in the UK that the Governmentis committed to delivering a competitive taxsystem. The headline rate really does matterto international investors. To pay or alow but competitive tax regime theChancellor also announced a package o anti-avoidance measures. For corporates,some changes around loss buying ruleshave been introduced.

The Government will remove the presumptiono sel -employment or Limited LiabilityPartnership (LLP) partners, to tackle thedisguising o employment relationships throughLLPs and counter the arti cial allocation o pro ts to partners (in both LLPs and other

partnerships) to achieve a tax advantage.The misuse o the partnership rules has beena eature o many avoidance schemes closeddown in recent years and the Governmentannounced on 5 December 2012 that HMRCwould consider the taxation o partnerships.

As a result o this work, the Governmentwill consult on measures to remove thepresumption o sel -employment or LLPpartners and tackle the disguising o employment relationships through LLPs. Itwill also look at measures to counter thearti icial allocation o pro its to partners (inboth LLPs and other partnerships) to achievea tax advantage.

COrpOraTION Tax raTE CUT

GOvErNmENT TO rEmOvE THEprESUmpTION Of SElf-EmplOymENTfOr lImITED lIaBIlITy parTNErSHIp

The Government isto abolish the stampduty it charges onshares on marketssuch as AIM.


16/16

The Finance Bill 2013 will be published on Thursday 28 March 2013. Content of the information featured is for your general information and use only and is not intended to address your particular requirements. Althoughendeavours have been made to provide accurate and timely information, there can be no guarantee that suchinformation is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thoroughexamination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions.

wHaT DOES BUDGET2013 mEaN fOr yOU?Whether youre an employer, a business person, in thepublic sector or an individual wondering how you area ected, our analysis and insight can help shed lighton the Budget measures. To discuss the impact on yournancial plans, please contact us for further information.

a guide to the budget 2013

Documents