“We can drink our way out of trouble 1p at a time”
The big policy news for those in pensions is the bringing forward of the changes to the Basic State Pension which weren’t in the budget but will profoundly impact Defined Benefit costs and possible benefits ( yes Michael Johnson – it looks like some people in the public sector will get even more pension!).
The not so big bit of news is that the Treasury have abandoned the idea of smoothing actuarial valuations (good thing too say the Institute of Actuaries – missed opportunity say my colleagues). The result will be to consign companies to the yoke of funding a liability that rises and falls with markets they know little and care less about. Many more companies will go to the wall as a result but at least the integrity of LDI is intact.
This wasn’t really a budget about pensions and the usual scare stories about threats to pension saving proved groundless.
Nor was it a budget for pensioners . Cleary the Chancellor , once he’d read yesterday’s blog, didn’t have time to change his tune. I promise to blog earlier next year Gideon.
The measures outlined (below) will influence our behaviours as we run our businesses (as well as our drinking habits). Pensions people are going to have to be thinking a lot more about business behaviours over the next five years as we introduce our own “pension tax” (well that’s what many SMEs refer to when they talk about auto-enrolment). Every tweak to national insurance , corporation tax and VAT is likely to have perverse implications for the planning companies make to integrate a corporate pension into their reward strategies.
I’m grateful to Chantrey Vellacott for this summary of the tax changes in the budget.
(i) From April 2015 the main rate of corporation tax will be further reduced by 1% to 20%.
(ii) From April 2015, the small profits rate and the main rate will be unified at 20% thereby removing complex tax rate calculations.
(iii) From April 2013, the headline rate of the R&D Large Company ATL credit will be increased to 10% from the 9.1% rate proposed in the 2012 Budget.
(iv) A disincorporation relief will be introduced for five years from April 2013 to allow a company with qualifying assets under £100,000 to transfer certain assets to its shareholders so that no corporation tax charge arises on the company on the transfer.
(i) From April 2014, businesses and charities will have an Employment Allowance of up to £2,000 per year towards their employer’s National Insurance Contributions bill.
(ii) From April 2013 the VAT registration threshold will be increased to £79,000.
(i) From 6 April 2014 the first £10,000 of income will be free from income tax, the personal allowance increasing by £560 to £10,000.
(ii) From 6 April 2014 the 40% tax band will start at £41,865.
(iii) From 6 April 2013 tax losses will be capped at the greater of £50,000 or 25% of income. Some reliefs will be exempt such as charitable reliefs and EIS and SEIS share loss relief.
(iv) The statutory residence test is introduced from 6 April 2013.
(v) From autumn 2015 a new Tax-Free Childcare Scheme will be introduced for 20% of childcare costs up to £1,200 per child per year.
(vi) The IHT nil-rate band will remain frozen at £325,000 until 2017-18.
(i) The annual CGT exemption will rise to £11,000 in April 2014 and £11,100 in April 2015.
(ii) There will be a 50% relief against CGT chargeable on gains realised in 2013-14 which are reinvested in the Seed EIS in 2013-14 or 2014-15.
(iii) Stamp Duty on shares for companies listed on certain growth exchanges such as AIM and ISDX will be abolished after April 2014.
(iv) From 6 April 2013 Entrepreneurs’ Relief will be extended to cover gains made on shares acquired through the exercise of EMI options.
(i) A new general Anti-Abuse Rule (GAAR) is being introduced.
(ii) The use of offshore employment intermediaries to avoid paying income tax and NICs will be countered.
(i) A new “Help To Buy” loan finance scheme will assist homebuyers unable to fund deposits on house purchases.
(ii) The fuel duty increase that was planned for 1 September 2013 is being cancelled.
(iii) The general beer duty is being reduced by 1p per pint.
(iv) The Bank Levy rate will be increased.
- The 2013 Budget at a glance – key points from Chancellor George Osborne’s statement to the House of Commons (independent.co.uk)
- Budget 2013: Checklist (telegraph.co.uk)
- ‘Pay for long-term care with National Insurance on pensions’ (telegraph.co.uk)
- My budget: what I’d be doing on Wednesday (taxresearch.org.uk)