Political overview
More doom and gloom from Mr Osborne this afternoon. The Government is still borrowing massive amounts of money and growth is almost non-existent.
The Government is looking to reduce department budgets so for contractors and small businesses working in these areas life can only get more difficult. On the positive side the Government have allocated a further £3 billion for infrastructure spending so if your business operates in the technical, engineering or construction sectors there maybe more contractor/small business opportunities.
As always with politics the Government gives with one hand and takes with the other. The Government has set a target to increase procurement from small businesses by 500% (this is the carrot). The stick is that (for central Government contracts only) a certificate of tax compliance will be required before any contract will be granted. This certificate will require a good record of filing and paying taxes for 6 years. The details have yet to be announced but Clearways Accountants will provide this information as clients need it.
Income taxes
The personal allowance will be £9,440 for 2013/14 and £10,000 for 2014/15
The threshold for higher rate tax will be £32,010 for 2013/14 and £31,865 for 2014/15
The top rate of tax (the additional rate) will be 45% for 2013/14 as set out in last year’s Budget.
The amount an employee can take as a tax-free loan from their employer will increase from £5,000 to £10,000. This sum is usually used to cover season tickets with monthly repayments from salary.
The CO2 emissions bands used to calculate the benefit-in-kind on company cars will be extended down to lower emission levels in 2015-16. The two new bands will be for:
- 0-50g with the benefit calculated at 5%; and
- 51-75g with the benefit calculated at 9%.
All the other bands will increase by 1% in 5g increments from this base level. As has been evident in the past the Government keep moving these bands down so your 0% car this year may be quite expensive in a couple of years time!
Finally, there has been considerable press coverage on the new childcare vouchers. This scheme that will run from Autumn 2015 and will give parents 20% support for childcare costs of up to £6,000 per annum. We will blog on this when the details are available.
Business and corporate taxes
For small (below the VAT registration threshold) self-employed and partnerships the cash basis of accounting will be available from April this year. Once we have checked the details we will be publishing a blog on this alternative accounting system.
Most of our corporate clients pay taxes at the small company rate of 20% and there is no change to this rate. For the bigger companies and groups the main rate of tax will be reduced from 23% for the year commencing 1 April 2013 to 21% in 2014 and 20% for the year commencing 1 April 2014.
IR35
Tucked away in the “Red Book” was a comment that the Treasury still have plans to extend IR35 to those who work as “office holders” in their end client. No details are available yet.
National Insurance
A surprise announcement from The Chancellor was the £2,000 per annum reduction in Employer’s National Insurance. Although it looks as if it will be available to all employers it is clearly aimed at small employers (and would be employers) as encouragement to take on staff. This benefit should be available to one-man Limited companies and so we will be including this in our calculations for the most tax efficient salary level in 2014/15.
The Treasury is consulting on possible changes to the way Class 2 National Insurance (paid by the self-employed) is to be collected. In the future it may be collected with income taxes and class 4 National Insurance
From 1 April 2016 employees will no longer be able to “contract out” and pay a reduced amount of Employee’s National Insurance; all employees will pay at the same rate, currently 12% on income up to £41,444 and then 2%.
VAT
The Chancellor looks to have avoided “pasty-gate” this year!
The registration and de-registration thresholds have increased to £79,000 and £77,000 respectively.
Clearways Accountants view
A pretty dull budget that will do little to boost the economy and therefore do little to improve the trading prospects of small businesses.
If you have any queries on any of the matters raised in the Budget 2013 then please contact us by email, telephone or by using the contact form on this page.
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