Still wondering about what the key things to come out of the Chancellor's budget were for you and your business? - Well read on...
The threshold at which people start paying income tax is to be raised to £10,000 in 2014 - a year early - an increase in the threshold of £560.
State of the nation
The Office for Budget Responsibility (OBR) has forecast growth of 0.6% this year, half of what it said it would be in December. But the OBR predicts the UK will escape recession this year.
After that, growth is predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.
Home buyers wishing to buy a new home worth less than £600,000 are to be given assistance. As long as they have a 5% deposit, the government will stump up an extra 20% - repayable when the house is sold.
Help for business
Chancellor George Osborne announced that corporation tax will be cut by 1% to 20% in April 2015.
This, Osborne said, will make the UK's corporation tax the lowest of any major economy in the world. The UK, he added, is "open for business".
Elsewhere, the Chancellor said some 450,000 small firms will pay no employer National Insurance.
Osborne also said stamp duty on AIM shares will be abolished from next April, in a move which he said will benefit hundreds of small business in the UK.
The government will give capital gains tax (CGT) relief on sales of businesses to their employees.
The government confirmed it will consult on options for transferring savings held in child trust funds (CTFs) into Junior ISAs.
The move will offer a lifeline to six million children.
Junior ISAs were introduced in November 2011 as an attempt to encourage saving for children, following on from the abolition of CTFs at the beginning of that year.
The Isle of Man, Guernsey and Jersey are to enter tax information exchanges with the UK that will significantly increase the amount of information automatically exchanged on potentially taxable income, in order to identify and tackle evasion. The move aims to recoup £3bn in unpaid taxes.
Additionally, the government will remove the presumption of self-
employment for limited liability partnership (LLP) partners, to tackle the disguising of employment relationships through LLPs and counter the artificial allocation of profits to partners (in both LLPs and other partnerships) to achieve a tax advantage.
The measures, the government forecasts, will in total raise over £4.6bn in new revenue over the next five years.
As previously announced, the single flat-rate pension of £144 a week is to be brought forward a year to 2016. This will end contracting out of the State Second Pension, so that everyone will pay the same rate of national insurance contributions and build up access to the same single-tier State Pension
Cap on social care costs confirmed at £72,000.
The government has also pledged to make £5,000 ex-gratia payments to Equitable Life policyholders who were too old to be eligible for compensation payouts. The government is not obliged to do it, Osborne pointedly said, but it is "the right thing to do".
Borrowing will be £114bn this year and is set to fall to £108bn, £97bn and £87bn in following years. The deficit has been cut by a third since May 2010.
Borrowing as share of GDP is to fall from 7.4% in 2013-14 to 5% in 2015-16.
Debt as a share of GDP will increase from 75.9% in 2012-13 to 85.1% in 2015-16.
The 2% Bank of England target is to stay in place, the Chancellor said, though its remit is to be changed to focus on growth as well as inflation.
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The key points of Chancellor George Osborne's 2013 budget are listed below:
FUEL, CIGARETTES AND ALCOHOL
A 3p fuel duty rise due in September scrapped
This April's 3p rise in beer duty scrapped. Instead, beer duty to be cut by 1p
The annual inflation +2% rise in beer duty to be ended but "duty escalator" to remain in place for wine, cider and spirits
Cigarette duty remains unchanged - continuing to rise by inflation +2%
The limit at which people start paying tax to be raised to £10,000 in 2014, one year earlier than planned
BUSINESS AND COMPANIES
Corporation tax to be cut from 21% to 20% in 2015
New employment allowance to cut National Insurance bills cut by £2,000 for every firm
450,000 small firms will pay no employer National Insurance
Government procurement from small firms to rise fivefold
Tax relief for investment in social enterprises
Stamp duty axed on shares traded on growth markets like Aim.
Tax avoidance and evasion measures, including agreements with Isle of Man, Guernsey and Jersey, aimed at recouping £3bn in unpaid taxes
Shared equity schemes will be extended, with interest-free loans for homebuyers up to 20% of value of new-build properties
Bank guarantees to underpin £130bn of new mortgage lending for three years from 2014
STATE OF THE ECONOMY
Growth forecast for 2013 halved to 0.6% from 1.2% in December
(OBR) Office for Budget Responsibility watchdog predicts UK will escape recession this year
Growth predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.
The OBR predicts borrowing of £121bn this year, the same as last year, and £120bn for 2014-5
Chancellor says the deficit as a share of GDP will fall from 7.4% in 2013-14 to 5% in 2015-16
Debt as a share of GDP to increase from 75.9% this year to 85.6% in 2016-17
SPENDING AND PAY
Most government departments to see budgets cut by 1% in each of next two years
Schools and NHS will be protected
£11.5bn in further cuts earmarked in 2015-16 Spending Review, up from £10bn
1% cap on public sector pay extended to 2015-16 and limits on "progression" pay rises in the sector
Military to be exempt from "progression" pay limits.
Proceeds of Libor banking fines to be given to good military causes, including Combat Stress charity
JOBS AND UNEMPLOYMENT
600,000 more jobs expected this year than at same time last year
Jobless claimants count to fall by 60,000
TRANSPORT AND INFRASTRUCTURE
An extra £15bn for new road, rail and construction projects by 2020, starting with £3bn in 2015-16
ENERGY AND ENVIRONMENT
Further tax incentives for ultra low-emission cars
Pottery industry in Midlands to be exempt from climate change levy
Special tax allowances for investment in shale gas
2% Bank of England inflation target to stay in place
Bank remit to be changed to focus on growth as well as inflation
Single flat-rate pension of £144 a week brought forward a year to 2016
A cap on social care costs confirmed
A 20% tax relief on childcare up to £6,000 per child from 2015
Up to £5,000 payments for those who lost money on Equitable Life policies bought before 1992. Extra money for those on low incomes
If you are worried how the budget may effect you and your personal circumstances then Tax Affinity Accountants can help. We provide a free initial consultations and are qualified experts in Tax and Accounting based in the Kingston upon Thames area.
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THIS IS VERY IMPORTANT INFORMATION
What's changed - PAYE in real time
From 6 April 2013 you will have to start reporting PAYE information in real time. You may see this referred to as Real Time Information - or RTI.
Unless HM Revenue & Customs (HMRC) has notified you otherwise, changing to PAYE in real time is mandatory. Each time you pay an employee after 6 April 2013 you must submit details about employees' pay and deductions to HMRC using payroll software.
Some employers have already started in 2012-13 as part of an HMRC pilot.
How will it affect you?
As an employer, each time you pay an employee, you already keep payroll information. After 6 April 2013 you will still operate PAYE in the same way but you must submit the payroll information you already keep to HMRC on or before the day you pay your employees.
You use a Full Payment Submission (FPS) to do this.
Your payroll software will generate the new reports you need and submit payroll information online. These will include details of:
You no longer submit end-of-year forms P35 and P14 and the starter and leaver process is simplified. You continue to give your employee a form P45 (employee parts) when they leave but you no longer send forms P45 (part 1) or P46 to HMRC. Instead you must report all starter and leaver information via your payroll software each time you pay someone.
This means that employers (or their accountant, bookkeeper or payroll bureau) will have to:
• send details to HMRC every time they pay an employee, at the time they pay them
• use payroll software to send this information electronically as part of their routine payroll process
How you submit your PAYE details
When you run payroll, your software gathers the PAYE information you send to HMRC, based on the payroll entries you make. You can use any RTI-enabled commercial payroll software (there are some free packages available) or HMRC's Basic PAYE Tools package which is designed for employers with nine employees or fewer.
You submit your PAYE information online to HMRC using commercial payroll software or HMRC's Basic PAYE Tools, if it's suitable for you. You do this via the Government Gateway, the online entry point to government services. You cannot use HMRC's PAYE Online Returns and Forms direct from the HMRC website to send this PAYE information.
You may be able to use Electronic Data Interchange (EDI) if you use commercial software. EDI is a dedicated connection or a secure network more suitable for large employers with employees running into the thousands. If you want to use EDI you must check if your payroll software supports it.
Changes to PAYE Online for real time reporting
Employers who are reporting their payroll information to HMRC in real time will use fewer features of PAYE Online than they did previously - even though those features still exist for employers not yet operating PAYE in real time.
You still submit reports online but these reports will be sent directly to HMRC using your payroll software or HMRC's Basic PAYE Tools.
You still need your PAYE Online login (User id and password) because although you can't log in directly to PAYE Online to report, you will need your login details when your payroll software sends your reports through the Government Gateway, which uses the same password and user id as PAYE Online does.
Reports that cannot be submitted directly Using PAYE Online
You will not be able to send us any of these reports by logging in directly using PAYE Online:
Getting your employee details ready
It's very important you use accurate employee details, such as full name, home address, date of birth, National Insurance number and gender before the new PAYE real time is introduced within your business. By doing this you will:
What will not change
The following will remain unchanged once you begin reporting PAYE in real time:
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The Treasury expects to raise over £4 billion from Capital Gains Tax (CGT) from the last tax year - 15% more than the previous year. In our view the main reason for this rise is the number of investors paying CGT at a higher rate has increased.
CGT is payable at 18% if you're a non-taxpayer or basic rate taxpayer, or 28% if you're a higher or additional rate taxpayer. Remember, CGT is payable when you realise profits in excess of the annual allowance (£10,600 in the current tax year).
One of the simplest way to protect your investments from any future CGT liabilities is to shelter them with an ISA. Once held with an ISA there is no further tax to pay on any investment income, and no tax to pay on gains. Each tax year you have an ISA allowance. If the allowance is used every year it offers the opportunity to build a significant portfolio of tax sheltered assets in the long run. This year the ISA allowance has risen to £11,280, that means a couple could shelter as much as £22,560 in ISAs.
Tax benefits of Stocks & Shares ISAs
For those who already hold investments showing substantial gains there are some simple steps you can take to reduce, or even eliminate completely, any CGT liability. Please note tax rules are subject to change, and the benefits of tax shelters will depend on your circumstances.
1. Offset losses against your gains
If you sell an investment and make a loss, the loss can be offset against any gains you have made in the same tax year. If your losses exceed your gains, you can register the losses on your tax return to offset against future gains.
2. Sell when you pay tax at a lower rate
The rate of capital gains tax is based on the rate of income tax you pay so your CGT bill will be lower if you realise gains when your income is lower. If you know your taxable income will fall in the future, perhaps due to retirement, you could consider delaying selling until then. However you should always look at your investment objectives and merits first and look at the tax benefits as an added bonus.
3. Transfer to your spouse and pay less tax
You can normally transfer investments between spouses without an immediate tax charge.
This means a married couple (or those in a registered civil partnership) can use both their annual allowances to make gains of £21,200 this tax year without paying CGT.
If your spouse pays tax at a lower rate than you, you could transfer the investments into their name before selling to benefit from CGT at the lower rate.
4. Reduce your taxable income
Because the rate of capital gains tax you pay is linked again to the rate of income tax you pay, reducing your taxable income could reduce the amount of capital gains tax you pay. The easiest way to do this is through tax shelters such as ISAs - income from an ISA is free from further tax.
In some cases you might be able to reduce your taxable income for a particular year - perhaps by transferring income-bearing assets such as cash deposits, to your spouse.
5. Use your pension to reduce capital gains tax
A pension contribution can also be used to reduce capital gains tax liability for many investors by taking advantage of the tax relief on the contribution. Effectively your basic rate tax band is increased by the amount of the pension contribution, meaning larger gains might be realised before the higher rate of capital gains tax is payable. For example, a pension contribution of £3,600 will extend your basic rate tax band from £42,475 to £46,075. Providing your taxable income and gains are less than £46,075 in this tax year, you will pay capital gains tax at 18% and none at 28%.
Find out more about Capital Gains Tax and how Tax Affinity Accountants can help you visit our website and arrange an a free initial consultation.
Please remember all stock market investments can fall as well as rise in value so you could get back less than you invest .
Tax Affinity Accountants based in Kingston upon Thames are experts in advising the public in all matters to do with tax and accounting.
In the current economic climate everyone should be looking for ways to save tax. And to help, we at Tax Affinity Accountants have compiled a list to do just that.
The tax codes, allowances and deadlines
1. Tax code
Check your tax code each year (the numbers and letters on your payslip). If you're on the wrong code, you may be paying too much tax.
2. Capital gains tax allowance
Remember that capital gains under £10,600 are tax-free. Married couples and civil partners who own assets jointly can claim a double allowance of £21,200. CGT is charged at 18% if you are a standard rate taxpayer, and 28% if you pay tax at a higher rate.
3. Tax return deadlines
Don’t miss the 31 October deadline if you want to make a paper tax return. You can do your tax online up to 31 January, but paper tax returns need to be in three months earlier than online tax returns to avoid a £100 fine.
4. Annual investment allowance
If you are a landlord or run your own business, take advantage of the annual investment allowance (AIA) to claim for capital expenditure on items such as tools and computers. You can claim relief on up to £25,000 a year.
How to pay less tax if you're self-employed
5. Tax-deductible expenses
If you’re self-employed, don’t forget to claim all your tax-deductible expenses, including cash expenditure where eligible.
6. Self-employed car costs
If you're self employed, you can claim the running costs of a car, but not the cost of buying one. If you use the same car privately, you can claim a proportion of the total costs.
7. Cash-flow boost for self-employed
If you are setting up as self employed, you may be able to improve your cashflow by choosing an accounting year that ends early in the tax year. This maximises the delay between earning your profits and your final tax demand.
8. Annual losses
If you are self employed, you can carry forward losses from one year and offset them against profits from the next. See our page on when the self-employed pay tax for more.
9. Payments on account
If you are self-employed and expect to earn less in 2012-13 than you did the year before, apply to reduce any payments on account that HMRC ask you to make.
Saving tax on property income
10. Rent a room
Rent a room relief is an optional scheme that lets you receive up to £4,250 in rent each year from a lodger, tax-free. This only applies if you rent out furnished accommodation in your own home.
11. Landlord's energy-saving allowance
If you rent out property you can claim special tax allowance of up to £1,500 for insulation, draught proofing and installing a hot water system.
12. Landlord's expenses
If you rent out property, you can deduct a range of costs before declaring your taxable income. These include the wages of gardeners and cleaners, and letting agency fees.
13. Tax relief on your mortgage
You can claim tax relief on the interest on a mortgage you take out to buy a rental property – even if it the rental property is abroad.
14. Reduce capital gains tax (CGT) on a rental property
Landlords are normally liable for CGT when they sell a rental property. If it has been your main home at some time in the past, you can claim tax relief for the last three years of ownership.
Pay less tax on savings and investments
15. Isa allowance
Use your tax-free Isa allowance. This year, the overall limit is £10,680, of which £5,340 can be put into in a cash Isa.
16. No CGT on shares held in an Isa
There is no capital gains tax to pay when you sell shares or units held in an Isa. For more details see Tax on savings and investments.
17. Junior Isas
Use Junior Isas or Children’s Bonus Bonds to avoid being taxed on gifts you make to your own children.
18. Transfer assets
Transfer savings and investments to your husband, wife or civil partner if they pay a lower rate of tax than you do. See our guide to tax and your partner for more information.
19. Children's savings
Stop children being taxed at source on their savings by completing a simple form (R85) on their behalf.
Tax savings for older people
20. Age-related allowance
If you are aged 65-plus you may be eligible for an increased personal allowance. This means you pay a lower income tax rate. See Tax in retirement.
21. National Insurance
Make sure you stop making National Insurance contributions if you carry on working beyond state retirement age (currently 62 for women and 65 for men).
22. Gift Aid
If you are over 65, making donations to charity through Gift Aid can reduce your taxable income to below the threshold at which you start to lose out on age-related allowances.
23. Tax relief on gifts
If you are in a higher tax bracket, you can claim back the difference between the basic and higher rate of income tax on any Gift Aid donations.
24. Inheritance tax
Lifetime gifts are not normally counted as part of your estate for inheritance tax purposes if you live for a further seven years after making them. Known as potentially exempt transfers (PETs) they can reduce your residual estate significantly. See our blog on inheritance tax.
Tax savings through employee benefits
25. Season ticket loan
If you are a commuter, check to see if your employer will give you a tax-free loan to buy your season ticket.
26. Pool cars
Use a pool car for occasional business travel, if your employer provides these.
27. Childcare schemes and tax credits
If you are an employee and pay for childcare, ask your employer if they have a childcare scheme. Salary sacrifice childcare schemes are easy to establish and can result in substantial savings for both employees and employers. For more details see working for an employer. Child tax credits can also save you money.
28. Company car?
If you are entitled to a company car, consider whether it would be more tax-efficient to take a cash equivalent in pay instead.
29. Going green
If you are changing your company car, consider a low-emissions model . These are now taxed at a lower percentage of their list price, than cars with a high CO2 rating.
30. Pay in to a pension scheme
Contributions to your employer's pension scheme (including any additional voluntary contributions you make) can be made from your gross pay, before any tax is charged.
For the most up to date and accurate advice speak to tax accountant, as these allowances and benefits do change every year.
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