The Chancellor delivered his Autumn Statement today, and I think it was a relatively good one (considering the pressure the Government is under to raise money!) for businesses and their owners – it’s clearly aimed at using business to kick start the economy.
Here are the main things you need to know:
Annual Investment Allowance
The limit for the annual investment allowance will rise from £25,000 to £250,000 for 2 years, with effect from 1st January 2013.
This means that you will be able to spend up to £250,000 on qualifying plant and equipment and benefit from full tax relief.
The main rate of corporation tax will be reduced by a further 1% to 21% from April 2014. From April 2013, the rate will be 23% as announced previously. This will affect businesses generating profits in excess of £300,000 – the small companies rate remains at 20%.
The annual allowance – the amount you can pay into a pension and get tax-relief – is being reduced from £50,000 to £40,000 per annum. This might not affect a huge number of people but we know many business owners who use pensions as a very tax-efficient way of extracting profits from their business and this has now been hampered slightly.
The lifetime allowance – the amount of pension benefits you can accumulate tax-free – is being reduced to £1.25m from April 2014. There will be some protection for those with pension pots over theirs amount, so if you fall into this category, it is essential you take advice.
For the tax year 2013-14 the Personal Allowance will increase to £9,440 and the basic rate limit will be set at £32,010.
For 2014-15 and 2015-16 the increase in the higher rate threshold will be capped at 1% – this will bring more people into the higher rate tax bracket, so personal tax planning will become more important.
The IHT nil-rate band was frozen at Budget 2010 at its current level of £325,000 until April 2015. For 2015-16 the band will be increased by 1% rounded up to £329,000.
This increase is minimal, especially as house prices are rising at a faster rate. With so many simple strategies to reduce your exposure to IHT, please take advice sooner rather than later.
I think it’s been a fairly positive autumn statement for most of our clients. As ever, if you have any specific queries, please do not hesitate to get in touch.