The 2013 Budget

The 2013 Budget

It’s hard to get excited about the Budget, after all the whole purpose of the Budget it to raise taxes isn’t it?

But maybe some good news?

Beer duty
A whole penny off a pint of beer. Let’s be honest, is it really worth it? If your preferred supermarket put on an offer of “Buy 350 pints get one free” would you be excited about it? Well, that’s exactly what the Chancellor did yesterday. OK he also scrapped the beer escalator which has the wine and spirits industry up in arms crying “foul”. But let’s not forget that Gordon Brown and Alistair Darling froze a duty increase on Whisky many years ago.

I suppose the good news here is that the penny decrease comes into effect on Sunday, but how much is it going to cost publicans to reprogram all their cash terminals for the lower price?

Personal Allowances
It has been a LibDem commitment to see the personal allowance rise to £10,000 during the course of this Parliament and let us thank them for pushing this one piece of good news forward. The Chancellor and the press are all saying that everyone will be paying less tax as a result. Low earners and basic rate taxpayers will be paying less. Table A (below) shows the changes in the rate of the personal allowance over the last few years.

For those that pay tax at higher rates these increases in personal allowances are largely negated because the level of income at which you start to pay tax at 40% has decreased every year since its peak in 2009/10, although surprisingly there is a small increase for 2014/15 – but there’s plenty of time for that to change – there is an Autumn Statement and a Budget between now and the start of 2014/15!  Table B at the end of this articles shows the changes  to the higher rate threshold.

Employer’s National Insurance
Over recent years this has become known as a “jobs tax”. Employer’s NI is nothing new – in fact I think it was introduced in 1911 – did anyone celebrate 100 years of NI a couple of years ago? Anyway, when an employee has NI deducted from his or her pay, the employer has to make a further contribution, currently running at 13.8%.
From 6 April 2014 (again we’ve all got to wait a year for this to come in) the first £2,000 of Employer’s NI is going to be covered by an allowance. The smaller the employer the bigger the impact this will have on their payroll costs.  Quite remarkably it would appear that this £2,000 allowance can be claimed immediately from April 2014 or spread over the full tax year – the cynic in me was thinking that this would be deducted at the end of the tax year. However, this £2,000 will then be subject to corporation tax, if you are a company, or to income tax, if you are a sole trader or partnership with employees. So he gives with one hand and takes away with the other.

Fuel prices
Once again the Chancellor announced that the proposed increase in fuel duty will be scrapped, but let’s not forget that fuel costs are at an all-time high and the VAT receipts from fuel are therefore higher than ever before. Did you realise that since November 2006 the average price of petrol has increased from 86p/litre to about 135p/litre (source – Guardian datablog). But as the Chancellor said yesterday, it would cost you £7 more to fill an Astra or Focus had the proposed increase gone ahead. A 60 litre fuel tank costs £81 to brim now compared with £67 only three years ago – that’s an increase of £14 or 23% increase in three years. OK not all of this due to duty increases but a large part of the price is duty and VAT.

Air Passenger Duty
Well, you’ll not be surprised to learn that APD is going up in April 2013 and again in April 2014, so your holidays are going to cost even more.

VAT
The Registration threshold has been increased from £77,000 to £79,000.

Corporation tax
The “large company” rate of corporation tax is 24% in the current year, reducing to 21% from April 2013 and then falling to 20% from April 2015 – which brings it into line with the small companies rate. This can only be good news on a couple of fronts – small companies which earn profits exceeding £300k per annum will no longer be subject to the punitive rates of tax they currently suffer as their profits climb towards £1.5m. Also it will attract investment into the UK from overseas. Somehow I still have a feeling that the big multi-nationals will still ship their profits offshore and still pay little UK corporation tax.

Class 2 National Insurance
Sole traders and partners pay Class 2 NI (normally by monthly direct debit, or by regular billing). HMRC is looking at bringing the collection of Class 2 as part of the self-assessment system.

Company Cars
From April 2015 the maximum charge is to increase from 35% to 37% for calculating the Benefit In Kind for company car tax end fuel benefit.

Road Tax
The rates for road tax will increase in line with inflation (RPI). Typical increases will be between £5 and £15 per annum. This does not apply to HGVs or buses.

Landfill tax
This is being increased from £8 per tonne to £80 per tonne from 1 April 2014 – so how is this going to affect our council tax bills for 2014/15 onwards?

Please do not hesitate to drop me an email if you have any specific queries!

Table A
Personal Allowances:
2004/05        £   4745
2005/06        £   4895 increase makes you £33 pa better off
2006/07        £   5035 increase makes you £30 pa better off
2007/08        £   5225 increase makes you £42 pa better off
2008/09        £   6035 increase makes you £162 pa better off
2009/10        £   6475 increase makes you £88 pa better off
2010/11        £   6475 no change
2011/12        £   7475 increase makes you £200 pa better off
2012/13        £   8105 increase makes you £126 pa better off
2013/14        £   9440 increase makes you £267 pa better off
2014/15        £ 10000 increase makes you £112 pa better off

The 10p starting rate of tax was abolished for 2008/09 which is why the allowance jumped from
£ 5225 to £ 6035. When you read in the papers that you’ll be £705 a year better off, it is not as a result of the increase to £10000 from £9440 or £ 8105 but this is an increase from 6 April 2011 up to 5 April 2015 – so that’s £14 per month on average over four years.

Table B
The point at which you start to pay higher rates of tax on your income:
2004/05        £ 36,145
2005/06        £ 37,295
2006/07        £ 38,335
2007/08        £ 39,825
2008/09        £ 40,835
2009/10        £ 43,875
2010/11        £ 43,875
2011/12        £ 42,475
2012/13        £ 42,475
2013/14        £ 41,450
2014/15        £ 41,865