Autumn Statement

Chancellor of the Exchequer, George Osborne has delivered the 2012 Autumn Statement providing an update on the Government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility. In his statement the Chancellor outlined a number of tax measures set to drive growth and reduce the country’s deficit.

The key tax measures announced are outlined below:

Business Tax

Corporation tax rate cuts and the cutting of red tape for small businesses as previously announced are on course. The main highlight for businesses is the 10 fold increase in the annual investment allowance taking effect from 1 January 2013. The measures announced are as follows:

•In addition to the Budget 2012 announcement, the main Corporation Tax rate for Financial Year 2014 will be reduced by a further 1% to 21%.

•As already announced, the main Corporation tax rate for Financial Year 2013 is 23% and the Small Profit rate is 20%.

•The Annual Investment Allowance will be increased from £25,000 to £250,000 per annum for a 2 year period commencing from 1 January 2013.

•A simpler income tax scheme for small unincorporated businesses will be introduced for the tax year 2013-14 to allow:

•Eligible self employed individuals and partnerships to calculate their profits on the basis of the cash that passes through their business. They will generally not have to distinguish between revenue and capital expenditure

•All unincorporated businesses will be able choose to deduct certain expenses on a flat rate basis

Personal Tax/Benefits and Credits

The personal allowance will increase and the higher rate of threshold will be capped and certain benefits which were frozen will increase by 1% in 2013-14.

•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%.

•For 2013-14, there are no changes to the percentage rate of contribution for Class 1 and Class 4 National Insurance contributions (NICs) but there are changes to all of the thresholds and limits.

•Child Benefit rates are frozen in 2013-14 and will increase by 1% in 2014-15 and 2015-16.

•Tax credits disability elements are increased in line with Consumer Price Index (CPI).

•Other elements are either frozen or will increase by 1% in 2013-14.

•All rates are increased by 1% in 2014-15 and 2015-16.

•Guardian's Allowance is increased in 2013-14 in line with CPI.

The full table of rates are available from HM Treasury.

Pensions Tax Relief

As expected the annual allowance for pensions tax will be reduced to £40,000 which the Chancellor says will affect the top 1% of savers.

For tax year 2014-15 onwards:

•the annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000

•the standard lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million

•a transitional 'fixed protection' regime will be introduced for those who believe they may be affected by the reduction in the lifetime allowance

Legislation will be introduced in Finance Bill 2013 to make these changes and will be published in draft on 11 December 2012.

Details of the changes are available from HMRC.

Anti Avoidance and Evasion

The Chancellor confirmed an earlier announcement that HMRC will receive £77m in funding to tackle tax evasion. The Government’s commitment to introducing a GAAR in 2013 was also reinforced and the Government’s intention to work with Germany and France to strengthen international standards for corporate tax regimes was also announced.

Five further measures have been announced in a Written Ministerial Statement. They have effect from today, 5 December 2012. These cover:

(1)Foreign bank levies - which are not allowable deductions for Income Tax or Corporation Tax purposes.

(2)Tax mismatch scheme - which reduce Corporation Tax liability through asymmetric tax treatment of loans or derivatives.

(3)Property return swaps - which convert capital losses into income losses.

(4)Manufactured payments - where schemes involve stock lending arrangements.

(5)Payments of patent royalties - relief for non trade payments to be abolished.

Details on the package of new rules and extra investment in HMRC are available from HMRC.

Other Taxes - Fuel Duty, Air Passenger Duty (APD), Inheritance Tax (IHT)

•The 3.02 pence per litre fuel duty increase that was due to take effect on 1 January 2013 will be cancelled and the increase that was planned for 1 April 2013 will be deferred until 1 September 2013.

•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.

•APD rates will increase by the Retail Price Index increase for September 2012 from 1 April 2013.

The Autumn Statement is available in full from HM Treasury.