The Chancellor has delivered the Government’s Budget for the coming year. Please find below a summary of the main points and tax rates for 2013/2014
Income Tax and National Insurance
The Personal allowance will rise to £10,000 from 6 April 2014, a year earlier than planned.
Allowances for 2013/2014 are as follows:
Personal allowance (born after 5 April 1948):
Personal allowance (born between 6 April 1938 and 5 April 1948): £10,500
Personal allowance (born before 6 April 1938): £10,660
Minimum married couples allowance*: £3,040
Maximum married couples allowance*: £7,915
Blind person's allowance: £2,160
Income limit for allowances for age related allowances: £26,100
Income limit for standard allowances: £100,000
* given where one partner was born before 6/4/1935, as 10% reduction in tax due
Income Tax Bands and RatesThe income tax bands for 2013/14 are:
Savings rate* (10%) - 0 to £2,790
Basic rate (20%) - 0 to £32,010
Higher rate (40%) - £32,011 to £150,000
Additional rate (45%) - over £150,000
*The savings rate of 10% only applies if the individual's net non-savings income does not exceed the savings rate limit.
National Insurance rates 2013/14
For 2013/14 the main rates and thresholds for NI contributions are:
Lower Earnings Limit (LEL) for Class 1 NICs - £109/week
Employer's class 1 above £148/week not contracted out - 13.8%
Employee's class 1 not contracted out from £149 to £797/week - 12%
Employee's additional class 1 above £797/week - 2%
Self-employed small earnings exemption - £5,725 per annum
Self-employed class 4 from £7,755 to £41,450 per annum - 9%
Self-employed class 4 additional rate above £41,450 per annum - 2%
Self-employed class 2 - £2.70 per week
Voluntary contributions class 3 - £13.55 per week
A new employment allowance was announced from 5 April 2014, where up to £2,000 can be offset against the cost of employers class 1 NI contributions. This will offer businesses a reduction in the cost of employing workers. This will be available for all businesses, not just new employees taken on by new businesses.
The main rate of corporation tax will be reduced to 20% from 1st April 2015, bringing it in line with the small companies rate. This will remove the need for the associated companies rule and the marginal rate of corporation tax.
The small companies rate is already 20%. The main rate will be 23% from 1 April 2013, 21% from 1 April 2014 and then 20% from 1 April 2015.
Loans to Participators
Where a company that is controlled by its directors or five or fewer shareholders, makes a loan to a participator (typically a shareholder/director), there are tax consequences. The company must pay 25% of the loaned amount to HMRC if the loan is not repaid within nine months of the end of company's accounting year. This rule is widely taken advantage of by company shareholder/directors who repay the loan just before the nine month deadline and immediately take out a replacement loan from the company. New tax avoidance rules will apply from 20 March 2013 such that:
- loans channelled through third parties
to shareholders will be included in these rules;
- transfers of assets from the company will be treated as loans; and
- the immediate replacement of a repaid loan will not count as a repayment of the first loan.
The rates and thresholds of the main capital allowances will apply as follows for 2013/14:
Main pool: writing down allowance: 18%
Special rate pool: writing down allowance: 8%
Annual Investment Allowance (AIA) cap: £250,000: 100% on qualifying expenditure. This is being reduced in January 2015 to £25,000
Capital Gains Tax
The thresholds for capital gains tax (CGT) have increased slightly for 2013/14:
Annual exemption: £10,900 (2012/13: £10,600)
Annual exemption for most trustees and personal representatives: £5,450 (2012/13: £5,300)
Rate for gains within the basic rate band: 18% (no change)
Rate for gains above the basic rate band: 28% (no change)
Rate for gains subject to entrepreneurs' relief: 10% (no change)
Lifetime limit for gains subject to entrepreneurs' relief: £10 million (no change)
The VAT rates remain unchanged at...
Lower rate: 0%
Reduced rate: 5%
Standard rate: 20%
The registration and deregistration limits from 1 April 2013 are...
Registration turnover: £79,000 (1 April 2012 - £77,000)
Deregistration turnover: £77,000 (1 April 2012 - £75,000