Budget 2012 – new tax rates and thresholds

Below is a summary, for small businesses, of the announcements made in today’s Budget.  Detailed tax rates and thresholds can be found on the HMRC website.

Individuals

• Personal allowance (the amount earned before tax is due) will increase to £8,105 from April 2012 and to £9,205 from April 2013.
• From 6 April 2012, National Insurance kicks in for employees when they earn in excess of £146 per week but employers have to start paying once wages exceed £144 per week (so much for simplification!) and the self-employed pay NI when earnings exceed £7,605 per annum.
• Basic rate tax band (20% tax rate) is to reduce to £34,370 from April 2012 and to £32,245 from April 2013.
• Higher tax rate (paid on earnings in excess of £150,000) will reduce to 45% from April 2013.
• Pension allowance is to remain at £50,000.
• Capital gains allowance is to remain at £10,600.
• Child benefit will be phased out, from Jan 2013, where one parent is earning between £50,000 and £60,000. No child benefit is payable once earnings exceed £60,000.

Companies

• Main company tax rate is to reduce to 24% from April 2012 and to 23% from April 2013.
• Small company rate (where profits are below £300,000) is to remain at 20%.
• IR35 changes are being proposed to ensure more businesses are caught but nothing concrete has been announced yet!

VAT

• Registration threshold to increase to £77,000 from April 2012.

Other

• Annual investment allowance (tax relief for fixed assets) will reduce to £25,000 from April 2012.
• Unincorporated businesses with a turnover below £77,000 will be able to use a simpler cash accounting system from April 2013.

The above is a brief summary of a 208 page Budget document.  If you suffer from insomnia, we recommend perusing the detailed Budget announcements.