Wednesday, 21 March 2012 saw the UK’s Chancellor of the Exchequer, George Osborne announce the Government’s Budget for the financial year 2012-2013.
According to the Treasury department, The Budget 2012 maintains the Government’s existing strategy, setting out measures aimed at supporting economic growth and creating a fairer, simpler and more efficient tax system. Whilst there has been much press comment, positive and negative, we set out the main changes that affect employers and employees.
Of the Employment related announcements, key developments include the following:
• EMI options: increase in individual limit and entrepreneurs relief
o Increase in the individual limit on the grant of enterprise management incentives (EMI) options from £120,000 to £250,000, to be introduced as soon as possible, subject to state aid
o Extension of entrepreneurs’ relief to shares acquired on the exercise of EMI options.
• Income Tax and National Insurance Contributions (NICs) reform – consultation to be issued shortly on the various options for integrating the two.
• PAYE penalties
o Consultation to be issued shortly by HMRC on changes to the penalty regime for late filing and payment of PAYE;
o To take account of the move towards real time filing of PAYE and NICs data.
Whilst most of the Pensions announcements had already been the subject of discussion in the pensions press prior to the Budget announcement, key developments here include:
• No change to the annual allowance – coming after several weeks of speculation that either the annual allowance or higher rate tax relief would be cut.
• A new single tier state pension, combining the basic and second state pensions, to be subject of a white paper in the spring.
o State pension age to rise automatically to reflect changes in longevity.
o The pensions infrastructure platform to go ahead – the first tranche of investment to be received early in 2013.
o Consultation on the introduction of gilts that mature over a longer period, as well as the introduction of perpetual bonds.
o Further changes to the treatment of asset-backed pension contributions to come into immediate effect.
Of the headline Tax announcements, the main changes here are:
• 50% rate of income tax to be reduced to 45% in April 2013
• Personal income tax threshold to rise from £7,475 to £8,105 in April 2012 and to £9,205 in 2013-2014
• Stamp Duty to increase to 7% on purchases over £2 million (15% for purchases by certain entities, including some companies and collective investment vehicles)
• Corporation tax to be cut by a further 1%, reducing the main rate to 24% from April 2012, 23% from April 2013 and 22% from April 2014
• Consultation to be issued ion introduction of a “general anti-abuse rule” (GAAR), designed to catch abusive tax transactions, in Summer 2012.
As many of these announcements require further consultation and consideration by the Government before legal changes are proposed and implemented, be sure to keep abreast of current developments through the Devonshires Employment Law blog.