2012 Budget Summary
Today's Budget (21 March 2012) announced some interesting measures. In particular they've announced some consultations for new provisions that will apply from 2013 (including CGT for offshore companies, transfers to a non UK domiciled spouse and the abolition of ordinary residence status). These are potentially far reaching and will be of interest to many of our members.
We'll look at these in more detail as the consultations progress but we've listed the features that we think will be of interest to our members below.
Corporation Tax
An additional 1% reduction in the main rate of corporation tax to 24% from April 2012. The small company rate remains at 20%, but the main rate (for companies with profits of more than £1.5M) will reduce to 23% from April 2013 and 22% from April 2014.
Income Tax
The top rate of income tax (for anyone earning over £150K) is reducing to 45% from April 2013.
The personal allowance is rising to £8,105 for 2012/2013 (and to £9,205 for 2013/2014). However, the basic rate band is being correspondingly reduced, so higher rate taxpayers won't see any difference.
New Income Tax Cap
Potentially a massive change. Legislation will be introduced from April 2013 to apply a cap on income tax reliefs claimed by individuals. The cap will apply only to reliefs which are currently unlimited. For anyone seeking to claim more than £50,000 in reliefs, a cap will be set at 25 per cent of income (or £50,000, whichever is greater).
Ordinary Residence
Ordinary residence status to be abolished from April 2013. They will be keeping the special relief from tax for anyone working overseas.
Non Doms
No changes for 2012 other than the ones we were warned about (ie the new £50K charge for anyone with 12 or more years of UK residence and the new exemption for remittances for businesses).
EIS Relief
The annual investment limit for individuals is to be increased to £1M (per investor) from 6 April 2012.
The Finance Bill 2012 will also legislate for seed enterprise investment schemes (SEISs), which will offer 50% income tax relief with an annual investment limit for individuals of £100,000. In 2012/13 only, SEIS will also offer a CGT exemption for gains realised on the disposal of assets that are invested in the scheme.
EMI share options
Again the qualifying amount is to be increased from £120K to £250K. Gains made on shares acquired through exercising EMI options after 5 April 2012 will also be eligible for CGT entrepreneurs' relief.
SDLT and Offshore companies
For anyone buying UK property via a non resident, "non natural person" (ie an offshore company) there will be a special SDLT charge of 15% where the property costs more than £2M. This applies from 21 March 2012 (subject to transitional rules).
In addition, there will be consultations on the introduction of an annual charge on residential properties valued over £2 million already owned by offshore companies, with the intention that the measure will come into effect in April 2013.
There will be a general 7% SDLT charge on the acquisition of residential properties over £2 million from 22 March 2012 (ie an increase in the rate by 2%).
CGT and offshore companies
They are consulting on changes from April 2013 to the tax treatment of non resident "non natural persons" owning UK property and shares or interests in such property.Again this is targeted at offshore companies owning UK property and will look to bring these within the CGT regime.
£55K limit for transfer to a non dom spouse
They are consulting from April 2013 on an increase to the IHT free exemption on a transfer from a UK domiciled spouse to a non dom spouse. They are also considering the possibility of allowing such a non dom spouse to elect to be UK domiciled for IHT purposes (so they don't have any restriction at all).
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The Author of this article/answer is our site Editor, Lee Hadnum. Lee is a rarity among tax advisers having both legal and chartered accountant qualifications. After qualifying a prize winner in the Institute of Chartered Accountants exams, he also went on to become a chartered tax adviser (CTA).He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.
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=============================================================i) Please note that the articles/answers contain general guidance only and do not constitute accountancy, tax, investment or other professional advice.
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