So George Osbourne joined twitter “Today I’ll present a Budget that tackles the economy’s problems head on helping those who want to work hard & get on” twitter.com/George_Osborne… but what did the budget actually say?..
IR35 was not mentioned in the speech but did receive a very brief comment in the published guidance. The Treasury says at 2.192 of its Red Book that “As announced at Autumn Statement 2012, the Government will make a small amendment to the existing IR35 provisions to equalise the tax and NICs treatment of office holders, and put beyond doubt that the legislation applies to office holders for tax purposes (Finance Bill 2013).”
There will be a new employment allowance which will take effect in April 2014. An “employment allowance” will mean companies will not have to pay the first £2,000 in employer national insurance contributions in a bid to help small businesses. Up to 450,000 small businesses will no longer pay national insurance contributions from next year, the chancellor claimed on Wednesday in what he described as “the largest tax cut in the budget”. This will mean a company can hire its first employee on £22,000 per year and pay no Employer NICs. This will particularly benefit any contractors who are caught by the IR35 legislation, as it will effectively lower their tax bill.
The Government has announced that it will undertake a formal consultation on two measures designed to counter the perceived misuse of partnership tax rules, namely;
- Removal of the presumption of self employment for partners in Limited Liability Partnerships (LLPs) – designed to tackle the disguising of employment relationships.
- Countering artificial allocation of profits/losses to partners (not limited to just LLP members) designed to achieve a tax advantage.
Any measures would be introduced following a consultation period. Any new rules would not be expected to take effect before April 2014.
TAX FREE CHILD CARE
The Government has announced a new scheme for tax-free childcare for working families. Once fully up and running, the Tax-free Childcare scheme will be worth up to £1,200 per child, and so will save a typical working family with two children under 12 up to £2,400 a year. Working families will be able to claim 20% of childcare costs of up to £6,000 for each child under 12 under a new Tax-Free Childcare scheme, to be phased in from autumn 2015; At the same time, the current system of vouchers and directly contracted childcare through Employer Supported Childcare (ESC) will be closed to new entrants; Any family not claiming tax credits and later Universal Credit, where all parents are in work but neither earns £150,000 or more can claim; The Government will also increase childcare support within Universal Credit by £200m, equivalent to 85% of childcare costs for a lone parent or both parents in a couple paying income tax; The details of how to provide this support will be determined as part of a consultation to ensure the two schemes operate effectively together.
A large new package of measures on tax avoidance and evasion to bring in £3bn in unpaid taxes is being introduced. This is particularly important for any contractors who are currently using offshore payment methods.
The Capital Gains Tax holiday is to be extended, tax incentives for ultra low-emission cars & tax allowances for investment in shale gas are all to be introduced.
The headline grabber was the fact that the main rate of Corporation tax will be reduced to 20% from April 2015 aligning the small and main rates.
The good news is that there was very little in this year’s Budget to worry VAT practitioners or VAT-registered businesses.
There was, of course, the usually annual updating of thresholds from 1 April 2013:
- The registration threshold goes up from £77,000 to £79,000
- The de-registration threshold goes up from £75,000 to £77,000
The new VAT threshold also sets the limit for three-line accounting for the self-employed on self assessment tax returns and for the new simplified bash basis accounting, which is available from 2013-14.
A new table of VAT fuel scale charges has been published and will apply to VAT accounting periods beginning on or after 1 May 2013. Charges have been increased by roughly 1.2%.
New Help-to-Buy scheme for people struggling to build up a deposit to buy a house, worth £130bn in loans. It includes £3.5bn for shared equity loans and Government interest-free loan worth 20% of the value of a new build house. Osborne said he wanted to help “hard-working families”, adding that they would be in a better situation as a result of the budget, with help to buy their own homes and to keep more of the money they earn. He added “We’re doing everything we can in very difficult times – which I don’t excuse, people know these are difficult times – to help all those families who aspire to work hard and get on.” The Treasury will provide £3.5bn over three years for shared equity loans to increase the sales of new homes, and will give mortgage guarantees to lenders to encourage them to lower the cost of home loans to all buyers.
PENSIONS AND SOCIAL CARE
Flat rate pension of £144-a-week brought forward to 2016. Cap on social care introduced in 2017 and set at £72,000. Threshold for means-testing of help raised from £23,000 to £118,000.
FUEL AND BEER
Planned rise in fuel duty this autumn is cancelled. Planned 3p rise in beer duty tax scrapped and replaced by a 1p cut on a pint of beer. Cigarette duties unchanged – continuing to rise by inflation +2%.
The limit at which employees & directors are required to pay tax on and report interest free loans has been doubled from £5,000 to £10,000 from 06/04/2014
Of course there were plenty of other tax rate changes that were already confirmed prior to the budget speech, we covered these in our blog last week. http://www.1stcontractoraccountants.co.uk/blog/budget-2013-%E2%80%93-what-can-we-expect/
You can view a full copy of the budget notes on the HM Treasury website, http://cdn.hm-treasury.gov.uk/budget2013_complete.pdf. For more information on how any of these changes affect you give us a call on 07508 261724.