Income tax rates for 2012/13 will remain at the 2011/12 levels. Personal allowance is expected to increase for 2013/14 from £8,105 to £9,205, while the basic rate limit will be reduced by £2,125, i.e from £34,370 to £32,245. As of 2013/14, age-related personal allowances will not be increased. Allowanes worth £10,500 will only be available to people
born prior to 6 April 1948 and those worth £10,660 to people born prior to 6 April 1938. Age-related allowances will be gradually phased out over the next few years. Additional tax rate will decrease for 2013/14 from 50% to 45% (from 42.5% to 37.5% for dividents). Tax rates for trusts are expected to reduce accordingly.
Please see analytical tables attached hereto as Appendix 1.
Cap on unlimited income tax reliefs
A cap will apply to income tax reliefs that individuals will be able to claim from 6 April 2013. The cap will apply only to reliefs that are currently unlimited – e.g. qualifying interest payments. For anyone seeking to claim more than £50,000 in reliefs, a cap will be
set at 25% of income (or £50,000, whichever is greater).
Domicile and residence
As already announced, changes to taxation of non-domiciled individuals will be in effect as of 6 April 2012. These will:
– allow individuals to bring their overseas income and gains to the UK on a tax-free basis, in order to make commercial investments
in qualifying businesses;
– increase the existing annual charge from £30,000 to £50,000 for those that have been residing in the UK for over 12 of the last 14 years;
– reduce the complexity of some aspects of the remittance basis rules.
As of 6 April 2013 a new statutory residence test will be introduced. Ordinary residence will be abolished for tax purposes from that date onwards, however overseas workday relief will be retained and placed on a statutory footing.
HRMC will be revising its practice on the taxation of non-resident sports people. It will be taking training days into account when calculating the proportion of worldwide endorsement income that is subject to UK tax.
Taxation of pensions
As of 6 April 2012 a number of changes to pensions will be in effect:
– standard lifetime allowance will be reduced from £1.8 to £1.5 million
– commutation rules will be extended to allow for individuals over 60 years of age to commute funds of up to £2,000 held in personal pensions into a lump sum, regardless of their other pension savings, subject to a maximum of two such commutations in a lifetime
– contracting out of the state second pension scheme via money purchase occupational schemes and personal pensions will be terminated.
There will be no change to the £50,000 annual allowance.
Finance Bill 2013 will be changing the rules allowing employers to pay pension contributions into their employees’ family members’ pensions as part of their remuneration package. Existing tax and NIC advantages from these arrangements will be removed.
Income tax on interest
Proposals for changes to the income tax rules on the taxation of interest and interest-like returns, as well as the rules on the deduction of tax at source from these amounts, will be put through a consultation stage. Changes resulting from this will be introduced in the Finance Act 2013.
Life insurance qualifying policies
There will be an effective £3,600 annual limit on the total premiums that an individual can pay into qualifying life insurance policies, such as maximum investment plans and other endowment policies, from 6 April 2013. If this limit is exceeded, the affected polices will cease to be qualifying and may give rise to a tax charge on gains. Transitional provisions will apply to qualifying policies issued on or after 21 March 2012 and before 6 April 2013, and before 21 March 2012 where certain variations are made after this date. These provisions will ensure that income tax relief continues to apply to benefits from these policies, but only in respect of the premiums paid before 6 April 2013 and premiums paid up to the limit on or after this date.
Life insurance chargeable events
The basis for calculating chargeable event gains that may be liable to income tax will be amended as of 21 March 2012, in order to prevent certain avoidance techniques involving interdependent clustered policies and the rules for deductions of earlier gains.
Capital gains tax
The CGT annual exempt amount will remain at its 2011/12 level of £10,600 for 2012/13. From 6 April 2013, it will rise in line with the consumer prices index (CPI) instead of the retail prices index (RPI), as announced in the Budget 2011.
Foreign currency gains
Gains on foreign currency deposits will be exempt from capital gains tax as of 6 April 2012. Individuals with foreign currency accounts can now convert them to sterling while the pound is weak.
CGT regime and non-residents
After a consultation stage on the relevant proposals, the CGT regime will be extended to cover gains on disposals by non-resident companies (and other non-natural persons) of UK residential property and shares or interests in such property, as of April 2013.
Single payment scheme and CGT roll-over relief.
As already announced, Finance Bill 2012 will be preserving the availability of CGT roll-over relief for farmers and companies in the farming business who dispose of or acquire entitlements under the EU SPS.
Stamp Duty Land Tax Rates
From 22 March 2012, a new SDLT rate of 7% for residential properties of over £2 million will apply. For residential properties of over £2 million purchased by companies and certain other non-natural persons, a 15% SDLT rate will apply from 21 March 2012.
Furthermore, there will be a consultation stage with the intention to introduce, as of April 2013, an annual charge on residential properties valued over £2 million already owned by such persons. The Government will consult on measures to simplify SDLT rules for non-standard leases.
Corporation tax and bank levy rates
As of 1 April 2012, the main rate of corporation tax will be reduced to 24%, rather than 25% as previously announced. It will be further reduced to 23% from 1 April 2013 and then to 22% from 1 April 2014. The small profits rate will be maintained at 20% from
1 April 2012. The full rate of bank levy will increase from 0.088% to 0.105% as of 1 January 2013 so that banks do not benefit from the CT reduction.
Tax simplification for small businesses
As of April 2013 and subject to the relevant consultation, a voluntary cash basis for calculating tax for unincorporated businesses with a turnover of up to £77,000 will be introduced. A consultation will also be taking place on a simplified expenses system for
business use of cars, motorcycles and homes, as well as on proposals to introduce a disincorporation relief. HRMC claims this will improve the administration of the tax system for small businesses.
Real estate investment trusts
Within 2012, the Government is expected to consult on the REITs regime, and in particular on the role it can play in supporting the social housing sector and whether the treatment of the income received by a REIT when it invests in another REIT should be
Controlled foreign companies
A new CFC regime will be introduced, following a consultation stage, for CFCs with accounting periods beginning after 31 December 2013. It includes a finance company partial exemption that will broadly result in an effective UK tax rate of 25% of the main CT rate on profits derived from overseas group financing arrangements.
Research and development
As of April 2013, an ‘above the line’ credit for R&D with a minimum rate of 9.1% before tax, will be introduced. Due to this, lossmaking companies will be able to claim payment of the credit. As of 1 April 2012, there will be an increase of the rate of R&D tax credits for SMEs from 200% to 225%, and as already announced, the limit on tax credit payable to SMEs as well as the £10,000 minimum expenditure rule will be removed.
Companies will be able to elect to apply a 10% CT charge to a proportion of profits attributed to patents and certain other similar types of intellectual property. The proportion will start at 60% from 1 April 2013 and increase to 100% over five years.
Business premises renovation allowance
As already announced, the BPRA scheme will be extended for a further five years to April 2017.
Capital allowances in enterprise zones
Capital allowances of 100% will be available to trading companies investing in plant and machinery in designated areas of the London Royal Docks enterprise zone, and enterprise zones in Irvine, Nigg, Dundee and Deeside from 1 April 2012.
As already announced, certain transactions involving transfers of assets or liabilities between UK- resident companies will not be excluded from being treated as distributions for CT purposes.
Corporate capital gains simplification
During the summer of 2012 the Government will be holding consultations on whether to introduce a rule allowing companies with a non-sterling functional currency to calculate their capital gains and losses in that currency.
Community investment tax relief
As of April 2013, the rules governing the speed with which Community Development Finance Institutions must lend on the funding they receive are expected to relax, and investors will be able to carry forward unused relief.
The group status of a company will be unaffected where it issues loan notes carrying a right to conversion into shares or securities of unconnected quoted companies.
As of 1 April 2013, the standard rate of landfill tax will rise from £64 to £72 a tonne. The lower rate will remain at £2.50 a tonne.
The VAT registration threshold will rise from £73,000 to £77,000 from 1 April 2012 and the deregistration threshold will increase from £71,000 to £75,000.
Correcting anomalies and closing loopholes
Standard rate VAT will be charged on the provision of self-storage facilities and approved alterations to listed buildings, as of 1 October 2012. Where it does not already do so, standard rate VAT will also apply to the sale of hot food, cold food consumed on the supplier’s premises, sports drinks, holiday caravan purchases and rental of hairdressers’ chairs.
A VAT exemption will be available for services shared between VAT exempt bodies, including charities and universities.
Stamp duty land tax: sub-sales rules
Finance Bill 2012 will put beyond doubt that an SDLT avoidance scheme that ‘abuses’ the sub-sales rules does not work. The change makes it explicit that the grant or assignment of an option cannot be a ‘transfer of rights’. The Government will also consult on the wider approach to addressing SDLT sub- sales avoidance.