Budget 2012 - Key points for contractors
Posted Mar 20, 2012
The Chancellor delivered his Budget speech at 12.30 today.
Aside from the expected lack of change to the IR35 regime, the additional income tax rate (for income over £150,000) will be cut from 50% to 45% from April 2013. There will also be a marked increase in the personal allowance from the same date, although sneakily this will be offset by a cut in the higher rate threshold in 2013/14.
You can access the HM Treasury Budget 2012 page here, which contains the full details (including the all important small print).
We have posted the most significant announcements, in what appears to be a generally underwhelming Budget for contractors, here:
Budget 2012 Key Points
- Growth forecast has been revised up to 0.8% for 2012, and is predicted to reach 2% in 2013 and 2.7% in 2014.
- Child benefit will be withdrawn gradually for taxpayers earning £50,000 or more, with no benefits at all for those earning £60,000 or more.
- Total public sector borrowing is likely to be £126bn in 2012 - lower than forecast.
- The 50% tax rate has been unsuccessful according to HMRC analysis of the latest self assessment figures, raising just £1bn compared to the initial £3bn estimate.
- From April 2013, the additional income tax rate will fall to 45%.
- From April 2013, the personal tax threshold will rise by £1,000 to £9,205.
- The higher rate (40%) threshold will fall again to £41,450 from April 2013.
- The accompanying Budget documents state that a package of measures will be introduced to make IR35 easier to understand by strengthening compliance teams, and by simplifying the way IR35 is administered. As expected, the current IR35 rules remain firmly in place.
- The Enterprise Finance Guarantee Scheme is to be extended.
- No changes have been made to the current National Insurance rates.
- Enhanced capital allowances will be provided for new set of Enterprise Zones.
- Consultation will begin on simplifying the way very small businesses are taxed. This will only apply to unincorporated businesses with a turnover of up to £77,000 per year.
- Further consultation is to be made on the merger of the income tax and National Insurance systems.
- Taxpayers will receive an annual statement stating how their taxes are spent by the Government.
- The main rate of Corporation Tax will be cut by 2p to 24p from April 2012, and by a further 1% in the following two years. The small profits rates remains at 20%.
- A new General Anti-Avoidance Rule (GAAR) will be introduced following Budget 2013.
- A new 7% stamp duty rate will now apply to home purchases of £2m or more.
- Significant new charges will be made on properties purchases through offshore companies.
- A new limit on uncapped income tax reliefs will be introduced. For claims over £50,000, there will be a cap of 25% on income (or £50,000).
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