2012 Budget Summary

UK Budget 2012

Today was the annual budget announcement by the Chancellor of the Exchequer, George Osborne. Many changes were anticipated in this budget with possibly the most reported being changes to the UK personal allowances which the Liberal Democrats have agreed with the coalition government should be increased eventually to £10,000 per annum by 2015. Whether the increase of the allowance to this level will be accelerated was a topic of much discussion.

Added to that were questions about fuel duty which is a bugbear of the UK, as they have such a high rate of tax making it one of the most expensive countries in the world for fuel.

So, after all the hype the most pertinent points in the UK budget for the ‘common man’ (and woman!) are listed below. Obviously there are many more points to report but this article is just to give the overview on the things in the UK Budget 2012 that affect us most in our everyday lives.

UK Tax Allowances: In line with the plan to increase the UK Personal allowance to £10,000, the Chancellor has announced the largest increase ever in the personal allowance of £1,100 to make the allowance £9,205 from the tax year 2013/14. This will mean that most people who earn above this amount will save £220 a year in tax.

However, age related allowances will eventually be scrapped as they are considered confusing and cause extra administration. Pensioners will not in effect suffer any financial loss because of the increase in the general personal allowance, but they will not be given any extra allowance on top of this.

Tax Rates: The only change is in the higher rate tax band which will be reduced from 50p to 45p as the band has been shown not to be fiscally viable.

Child Benefit: It was previously announced that anyone paying higher rate tax would not be entitled to child benefit but this has been clarified and slightly revised so that there is a tapered system and not just a cut off. The amount of child benefit will be reduced by 1% for every £100 earned over £50,000.

Fuel: Fuel duty will not rise and this will remain the case unless the price of oil drops below £40 a barrel in which case this can be reviewed. So no change at the pumps for the present time.

Alcohol: the chancellor said that he was not making any further changes to the alcohol duty increases that were set out by his predecessor.

Smoking: There will be an increase in the duty on cigarettes and tobacco of 5% and this will be effective from midnight tonight (21st March 2012). This will put an average of 37p on a packet of cigarettes. The reason that the Chancellor introduced this is that smoking is the biggest cause of preventable illness and death in the UK and there is evidence that increasing the rate of duty on smoking encourages more people to give up or reduce their intake.

Stamp Duty: The only change to stamp duty land tax does not effect the everyday housebuyer. In order to stop avoidance of stamp duty, a tax rate of 15% was introduced for residential property being bought under the umbrella of a company and a rate of 7% introduced for properties over the value of £2m. Effective Midnight tonight.

Corporation Tax: Corporation tax has been cut and will be cut further to 24% from next month. It will also be reduced so that over the next 2 years it will decline to 22% – one of the lowest rates in the world, to encourage investment in Britain.

Armed Forces’ Families: Extra relief will be given to families of those deployed with a 100% relief on council tax and the operations allowance and welfare grant doubled.

Further Budget Issues

Gambling duties for online sites will be based on the location of the consumer and not the company providing the service. This is because companies have been forced to set up overseas so that they don’t have to pay the higher tax rates that apply in Britain. 90% of online gambling sites are offshore.

Each individual will be sent a statement detailing how much tax they are paying and what services that money is going towards, including how much of that tax is funding the deficit and how much is contributing to public spending.

There will be a restriction as to how much higher earning individuals can use tax relief schemes to offset the amount of tax that they pay. At the moment the reliefs are unlimited but for anyone claiming more than £50,000 in relief this will be restricted to 25% of their earnings.

Vehicle duty will be increased but will be frozen for haulage contractors.

There will be a continuous review of the State Pension Age to keep it in line with longevity factors.

Network rail will be expanding some of the rail networks in the North including rail lines in the Manchester to Sheffield area.

The government will be backing the Life Sciences sector. At present 1/5 of new medicines are developed in the UK and there will be reductions in the taxes on patents. There will also be an centre for excellence in the field of aerodynamics set up where Britain already leads the way. Added to this there will be schemes to encourage investment in development of video games, animation etc. As George osborne said “Keep Wallace and Grommet where they are!”.

The government will be funding ultrafast broadband in 10 cities: Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, Manchester, Newcastle and London.

There will be an overhaul of planning regulation particularly so that we can get investment from abroad that is currently going elsewhere because they can’t get planning consent.

Legislation will be introduced to relax Sunday trading laws for 8 Sundays starting 22 July in line with the Olympics being held in London.

They will be exploring the idea of enterprise loans for young people to start their own businesses.

Tax on small firms will be on the basis of cash that passes through – those with a turnover up to £77k – this will make tax simpler for 3m firms.

They will be moving forward with integration of NI and tax. They will address loopholes in the current VAT regulations e.g. where VAT is different when paid on takeaways from the high street and those from a supermarket.

Tax Relief on Pension Contributions

Happy RetirementThere have been many many changes to how pension schemes are run and the tax relief on not only pension schemes but also pension scheme contributions in the last decade and indeed further back. Pensions are such a confusing thing to so many people that they take one look at the rules and regulations for pensions and decide they are too complicated and put them to one side. Continue reading Tax Relief on Pension Contributions

Over 65 Allowance Reduces With Income

If you are over 65 and expecting to receive the higher rate of personal allowance due to your age, then you need to be aware that the increased personal allowance for those aged 65 and over (and indeed the even higher personal allowance for those aged 75 and over) can be reduced to the level of the basic personal allowance if your income is higher than a certain level. For the tax year 2011-12 this amount is £24,000 and for the year 2012-13 the amount is £25,400. Continue reading Over 65 Allowance Reduces With Income

What Is The Personal Allowance for 2012-13?

The personal allowance, i.e the amount of tax free income that you can earn, for the tax year 2012-13 is £8,105 for a person under the age of 65. This is subject to your earnings not exceeding £100,000 and has been increased from the previous year when the rate was £7,475. The aim is the have a personal allowance of £10,000 for everyone and this is being introduced gradually. Continue reading What Is The Personal Allowance for 2012-13?