Announced on March 29th 2012, The longest Finance Bill passed in 20 years runs to over 600 pages and includes some notable changes to existing laws. Key changes include alterations to corporation tasks, adjustments to personal allowance, and new regulations for investment, enterprise and non domiciled tax rates. At the same time, tax credits for working parents will experience changes in eligibility for 2012-2013. The new Finance Bill will consequently increase taxation in some areas while cutting back in others, and encourages investment for a down economy.
As part of the 2012 Budget, the Finance Bill is set to continue policies for fiscally neutral changes, with investment opportunities increased and corporation tux cut. Income tax cuts from 50p to 45p will also produce very little changes. Moreover, tax relief for pensioners will roughly stay at 2011-2012 rates.
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Key Points:
One of the major taxation changes will be a reduction in Corporation Tax to 24%, with expectations of continuing cuts over time at a rate of 1%. Small and medium enterprises will also be encouraged to claim tax exemptions by deducting expenditure in research and development, although tax repayments on failed research programs will also rise.
In terms of the coalition government?s wider privatisation policies, Enterprise Investment Schemes and Venture Capital Trusts will allow for increased investment in businesses, as well as income tax deductions and reductions on capital gains tax for investments in new enterprises.
Capital allowances will also be enhanced, as long as expenditure comes under Enterprise Zone terms and condition, and will apply on key ares from the 1st April 2012 to the 31st March 2017. Capital Gains tax will also be subject to new Extra Statutory Concessions, particularly when winding up companies.
National Insurance and Income Tax
National insurance contributions will be frozen at current rates, while a basic personal allowance will be increased by ?630 to 38,105.
Personal investments in ISAs will also be increased to a maximum of ?11,280, with ?5,640 allowed in cash. Non domiciles will also face a remittance basis charge of ?50,000 if they have been resident for twelve of the previous fourteen years of a tax charge. Inheritance tax is also changing, with a 36% tax rate now set to apply to estates which leave 10% of an estate to charity.
Tax Credits
Inflationary increases will affect benefits, but family tax credits and child tax credits face new income limits. Child benefit will be removed for claimants with a net income of between ?50,000 and ?60,000 from January 2013. New rules mean that joint working hours need to be at least 24 hours a week to quality, with one person working 16 hours a week. If this does not apply, a Working Tax Credit will be withdrawn, albeit with exceptions for personal circumstances.
VAT
Registration thresholds for VAT are now set to rise to ?77,000 from April 1st, with a deregistration threshold coming to ?75,000. Companies will now have to file their returns online, and will be subject to new rules on salary sacrifice schemes and low value item imports.
Currently writing for well known company formation specialists Stanley Davis, Matt Mynors is a freelance copywriter covering financial topics such as formation advice, and tax planning for company directors.
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