AUTUMN STATEMENT 5 DECEMBER 2012
Confirming what we all knew to be the case, George Osborne advised today that the UK economy is forecast to shrink in 2012. The actual percentage rate is small, just 0.1%. In the subsequent 5 years to 2016-17 we are advised that the UK should achieve modest growth as the present factors holding back the economy fall away. Next year, growth is forecast to be 1.2% rising to 2.8% in the year 2017.
The changes announced in the Autumn Statement are fiscally neutral – any savings are matched by new expenditures.
There are a number of initiatives to be implemented from April 2013 that are aimed to reduce loss of tax revenue due to tax evasion. These are explained in more detail in the notes that follow together with details of other expected tax changes.
Personal tax and benefits
Pensions Savings – tax relief
The expected decrease in tax relief on pension contributions was confirmed. However, the change will not be applied until 6 April 2014. For the tax year 2014-15 onwards:
The lifetime allowance is the maximum amount of pension contributions you can make that benefit from tax relief. If the lifetime allowance is exceeded, a lifetime allowance charge is levied on the excess. This is presently 55% if excess is paid as a lump sum and 25% is paid as a taxable pension.
Legislation will be introduced in Finance Bill 2013 to make these changes and will be published in draft on 11 December 2012.
This is one of the few measures introduced to increase the tax take from higher income earners.
In addition to the Budget 2012 announcement, the main Corporation Tax (CT) rate for Financial Year 2014 will be reduced by a further 1% to 21%. As already announced, the main CT rate for Financial Year 2013 is 23% and the Small Profit rate is 20%.
Annual Investment Allowance
In the hope that businesses will increase investment, the Annual Investment Allowance will be increased from £25,000 to £250,000 per annum for a 2 year period commencing 1 January 2013. This is a tenfold increase. The Annual Investment Allowance provides a 100% write off for purchases of qualifying equipment. This could include plant, computer equipment, furniture, vans and other fixtures and fittings. For profitable, self-employed business people, who need to invest in this type of asset, tax savings could be considerable as the relief will impact their higher and additional rate liabilities.
Simplified tax scheme for small unincorporated businesses
A simpler Income Tax scheme for small unincorporated businesses will be introduced for the tax year 2013-14 to allow:
Small Business Rate Relief
The present Small Business Rate Relief Scheme is to be extended for a further year to April 2014.
Other Taxes – Fuel Duty, Air Passenger Duty (APD), Inheritance Tax (IHT)
Anti-Avoidance and tax evasion
The Government accepted the recommendations of the Aaronson report that a General Anti-Abuse Rule targeted at artificial and abusive tax avoidance schemes would improve the UK’s ability to tackle tax avoidance. The Government has committed to bringing forward legislation in Finance Bill 2013 to enact this measure.
Earlier this week, the Chancellor of the Exchequer and the Chief Secretary to the Treasury announced that the Government is investing a further £77 million in HMRC to increase revenues raised from tackling tax avoidance and evasion.
This investment will be used to:
Additionally, five further measures have been announced in a Written Ministerial Statement. They are effective from 5 December 2012 and cover:
Individual Savings Account (ISAs)
From 6 April 2013 the overall limit is increased to £11,520 (2012-13 £11,280), of which £5,760 can be invested in cash (2012-13 £5,640).
The junior ISA is increased to £3,720 (2012-13 £3,600).
Fuel benefit charge
From 6 April 2013 the car fuel benefit multiplier is increased to £21,100 (2012-13 £20,200). This figure is used to tax company car users whose employers pay for their private petrol usage. The charge can be legitimately avoided if the employee reimburses the cost of private fuel used. The equivalent van fuel benefit charge is increased from the same date to £564 (2012-13 £550).
Reducing tax credit error, fraud and debt
A number of initiatives have been announced aimed at reducing the levels of tax credit error and fraud and recovering tax credit debt. They include:
New initiatives aimed at recovering debt owed to central government include:
Over the next three years, HMRC will significantly expand the range of digital services to include: