The small business guide to what is new and what is changing from the Chancellor’s Autumn Statement 2012

Personal allowances and tax thresholds

  • For the tax year 2013-14 the Personal Allowance will increase to £9,440 and the basic rate limit will be set at £32,010.
  • For 2014-15 and 2015-16 the increase in the higher rate threshold will be capped at 1%.
  • Child Benefit rates are frozen in 2013-14 and will increase by 1% in 2014-15 and 2015-16.
  • For 2013-14, there are no changes to the percentage rate of contribution for Class 1 and Class 4 National Insurance contributions (NICs) but there are changes to all of the thresholds and limits.

We say: there is an opportunity to take a higher salary out of your company before incurring national insurance as the thresholds are due to increase. The company NI threshold increases from £139 per week to £148 per week, almost in-line with Employees NI at £149 per week

Capital expenditure

The Annual Investment Allowance will be increased from £25,000 to £250,000 per annum for a 2 year period commencing from 1 January 2013.

We say: this rate has been up and down like a yoyo since it was first introduced.  Useful if you are in a capital intensive business like film or engineering.  Less useful for many other small businesses.

Cash accounting

A simpler income tax scheme for small unincorporated businesses will be introduced for the tax year 2013-14 to allow:

  • Eligible self employed individuals and partnerships to calculate their profits on the basis of the cash that passes through their business. They will generally not have to distinguish between revenue and capital expenditure
  • All unincorporated businesses will be able choose to deduct certain expenses on a flat rate basis

We say: the threshold for cash accounting was proposed at £30,000 so this is for the smallest of businesses.  The detailed legislation will be published on 11 December.

Pensions Savings – Tax Relief

For tax year 2014-15 onwards:

  • the annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000
  • the standard lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million
  • a transitional ‘fixed protection’ regime will be introduced for those who believe they may be affected by the reduction in the lifetime allowance

We say: probably not a limit most people will be affected by, remember if you haven’t used your full amount in previous years you can carried forward for use in a later year.  See our blog on pensions.

Tax of controlling persons

This proposed new legislation, see our blog for the outline of the rules, has not been mentioned in any of the press releases; hopefully it has been permanently dropped. We will find out on 11 December.

We say: this was a poorly conceived idea and hopefully it has been dropped. 

Attached is a table from HM Treasury website with all the new rates and thresholds.

Image supplied by Vichaya Kaitying-Angsulee through