The UK Chancellor presented the 2012 UK Budget on Wednesday 21 March. A summary of the key points can be found below.
2012 Budget Update – tax cuts increase UK competitiveness
The UK Chancellor presented the 2012 UK Budget on Wednesday 21 March. The well published predictions in the run up to the speech were proved to be accurate and the new measures contained little element of surprise.
The coalition commitment to increase the tax free personal allowance to £10,000 by April 2015 was already on track with the previously published increase to £8,105 from 6 April 2012. The Chancellor announced that the allowance would be increased to £9,205 from 6 April 2013 then to £10,000 from 6 April 2014, thus reaching the target a year earlier than predicted.
Following a government led analysis of the total tax raised through the introduction of 50% rate (for income in excess of £150,000), it was suggested that additional receipts had been 2/3rds lower than estimated, partly caused by many taxpayers simply shifting income to the prior year. This provided the justification needed to enable the Chancellor to announce a reduction to the top rate of income tax from 50% to 45% effective April 2013.
The theme of increasing UK competiveness continued with the announcement that the corporation tax rate would be cut from 26% to 24% from April 2012. Future cuts will see the rate drop to 23% in April 2013 and 22% in April 2014.
The Chancellor added that this was “a headline rate that is not just lower than our competitors, but dramatically lower - 18 per cent lower than the US, 16 per cent lower than Japan, 12 per cent below France and 8 per cent below Germany,” and “an advertisement for investment and jobs in Britain, and a rate that puts our country within sight of a 20 per cent rate of business tax that would align basic rate income tax, the small companies rate and the corporation tax rate.”
For expatriates, the main announcement of significance was the proposal to abolish ordinary residence for tax purposes but retain Overseas Workdays Relief and put it on a statutory footing. This change will be implemented from 6 April 2013.
Other measures, that had already been announced prior to the Budget, include:
- reforms to the taxation of non-domiciled individuals, announced at Budget 2011, which will be implemented from 6 April 2012 as planned. Legislation will be introduced in Finance Bill 2012
- The Government reaffirming its commitment to implement the statutory residence test in Finance Bill 2013 to take effect from 6 April 2013. This was announced in a Written Ministerial Statement made by David Gauke MP, the Exchequer Secretary to the Treasury, on 6 December 2011
A full summary and details of the new tax rates and allowances applicable for 2012/13 will shortly be available on our website at the following link: http://www.globaltaxnetwork.co.uk/company/tax-rates-allowances-and-budget-information.html