Yesterday’s UK Budget was something of a damp squib with little apart from the rise in the tax-free personal allowance to shout about. Our UK tax gurus have put together the analysis below. Don’t forget the best way to counteract a stringent Budget is to apply for a tax refund!
- Tax-free personal allowance to rise by £1,100 from April 2013 to £9,205. Some analysis suggests this will take two million lower earners out of tax altogether and will make 24m people £220 a year better off. For your average Bulgarian harvest worker in the UK or Aussie backpacker working a pub job, for say six months of the tax year on around minimum wage, this could mean tax refunds of at least £379. The tax-free allowance is set rise again to £10,000 in April 2014. This is a year earlier than planned.
- Child benefit (currently not means tested and payable p.w at £20.30 for first child and £13.40 for subsequent children) will be withdrawn from higher rate taxpayers if someone in the household has an income of more than £50,000. To avoid a "cliff-edge" effect, child benefit will be withdrawn at 1pc for every extra £100 earned over £50,000. My understanding is that this claw back will be effected through a tax adjustment. Many more people therefore could be thrown into UK self assessment and will have to file tax returns to regularise their positions.
- No further changes to fuel duty. However, a 3.02p per litre fuel duty increase will take effect on August 1 as planned. A good incentive to make the most of the 'use of own transport for business miles' and authorised mileage rates rules (45p for first 10,000 business miles!)
- The top rate of income tax cut will be cut from from 50p to 45p from April 2013. This is paid by people earning more than £150,000. The Chancellor said that a rate of 50p had not made a huge difference to the tax take, to date.
- Age-related allowances for pensioners are to be frozen, starting in April 2013 (currently set at £9,940 for people aged 65-74 and £10,090 for those 75 and over.)Chancellor George Osborne claims no pensioner will lose in cash terms but analysis suggests that inflation will see this group of people pay £3.3bn more in tax - in reality, 4m pensioners will be £83 a year worse off (although basic state pension is rising to around £140 per week.) The pensioners bit in particular has led to some fairly hostile headlines in what would normally be seen to be fairly 'friendly' papers in the UK 'Granny tax hits 5 million pensioners..' - Daily Telegraph.
- The Government is to introduce a General Anti-Avoidance Rule for UK tax system to prevent "morally repugnant" tax evasion. Similarly, stamp duty on residential properties over £2m that are bought via a company will increase to 15pc, taking effect from today to close the loophole. Stamp duty on properties worth over £2m increases to 7pc from midnight tonight.
- Duty on all tobacco products to rise by 5pc above inflation from 6pm today - the equivalent of 37p on a packet of cigarettes, although insignificant change to duty rates on alcohol - yay!