Welcome to the January 2013 Newsletter from Connolly Accountants Ltd

2013 sees the introduction of a number of significant new tax measures that could affect you and your business, not least the onset in January of the high income child benefit charge, and the rise in the annual investment allowance as announced in the 2012 Autumn Statement. This Newsletter provides a round-up of some of the key changes coming into effect.

Meanwhile, in the wake of the recent Autumn Statement, dubbed a 'mini-Budget' by the media, some pensions experts have warned that plans to cut the annual and lifetime pensions tax allowances could impact on relatively modest earners with final salary pension schemes.

The Chancellor has since announced that the main 2013 Budget will be presented on Wednesday 20 March.

We would like to wish all of our customers Season's Greetings and our best wishes for a happy and prosperous New Year.


What's in store for 2013?

The 2012 Autumn Statement included a raft of announcements taking effect in 2013, together with confirmation of some measures which had previously been announced. Here we consider some of the forthcoming changes that could affect you and your business.

High income child benefit charge

From 7 January 2013, changes to the rules on child benefit mean that higher or additional rate taxpayers will be liable to a tax charge, while many thousands of people will need to complete a self assessment tax return for the first time.

The charge applies to taxpayers whose income exceeds £50,000 and who are in receipt of child benefit, or whose partner is in receipt of child benefit. For more information on the changes, visit our Hot Topics section.

Capital allowances relief increased

The annual investment allowance will increase from £25,000 to £250,000 per annum for all qualifying investments in plant and machinery made on or after 1 January 2013, for a temporary period of two years. Transitional rules will apply to any chargeable periods spanning the date of the change. Please talk to us about optimising the timing of any investments that you may be planning.

Income tax rates and allowances

In the Autumn Statement, the planned increase in the basic income tax personal allowance was raised by an additional £235, bringing it to £9,440 for 2013/14. The Chancellor also confirmed that the age-related personal allowances will not be increased, and availability will be restricted to people born on or before 5 April 1948.

From 6 April 2013, the additional rate of income tax will also fall, as planned, from 50% to 45%. The dividend additional rate will reduce in line with this from 42.5% to 37.5%, and trust rates will mirror these changes.

Corporation tax

The main rate of corporation tax will be reduced from 24% to 23% for the financial year beginning 1 April 2013. In addition, the Chancellor announced in the Autumn Statement that from 1 April 2014 the rate will fall to 21%, rather than 22% as had previously been planned.

Company car tax

From 2013/14, the car fuel benefit charge multiplier will rise from £20,200 to £21,100 and the van fuel benefit charge will rise from £550 to £564. We can review your company car policy and advise on the most appropriate option for your business.

Real Time Information: Are you ready?

April 2013 also sees the introduction of HM Revenue & Customs' new PAYE regime. Under Real Time Information (RTI), employers must report the payments and deductions they have made under PAYE when or before each payment is made. For further information and advice, visit our article 'Are you ready for the new PAYE regime?' (located in the PAYE, NICs and Benefits section).

To discuss how any of the changes could affect you and your business, please contact us.


Modest earners 'could be hit' by pension tax relief cuts

Plans to cut the annual and lifetime pensions tax allowances have attracted criticism from the pensions industry, with some experts warning that the changes could have an adverse impact on individuals with final salary schemes.

In his 2012 Autumn Statement, Chancellor George Osborne announced that the annual allowance would be cut from £50,000 to £40,000, from 6 April 2014. The lifetime allowance will also be reduced from £1.5m to £1.25m from this date.

The Chancellor predicted that just 1% of all people saving into pension schemes will be affected, yet some experts have suggested that many relatively moderate earners with generous final salary pension schemes will incur tax bills as a result of the changes.

Joanne Segars, Chief Executive of the National Association of Pensions Funds commented, 'People in a final salary pension who have worked loyally for the same employer for years and then get a pay rise, or a promotion, could end up with a tax bill of several thousand pounds'.

'The self-employed and those nearing retirement desperately trying to 'catch up' by boosting their pension are also at risk,' she added.

Meanwhile, proposed EU pension changes could impose substantial additional costs on businesses and result in 180,000 jobs being lost, according to the Confederation of British Industry (CBI).

The European Commission is currently considering the 'Solvency II' regulations, which would make it mandatory for employers to divert hundreds of billions of pounds into defined benefit schemes in order to reduce their deficits.

According to independent analysis commissioned by the CBI, UK firms would be hit by £350 billion of additional costs to fund the changes, while growth would be 2.5% lower over the first 15 to 20 years of a new regime.

The research also suggests that employment would be cut by 0.5%, or 180,000, by the mid-2020s, as a direct result of the changes, with subsequent revival dependent on cutting wages or hours.

Recent press reports have suggested that the Commission is planning to publish draft legislation on Solvency II by the early part of Summer 2013.


ESSENTIAL TAX DATES AND DEADLINES

1 January
Due date for payment of corporation tax for period ended 31 March 2012.

14 January
Due date for income tax for the CT61 quarter to 31 December 2012.

18/22 January
Quarter 3 2012/13 PAYE remittance due.

31 January
First self assessment payment on account for 2012/13.
Capital gains tax payment for 2011/12.
Balancing payment - 2011/12 income tax/Class 4 NICs.
Last day to renew 2012/13 tax credits.
First payment due date for 2012/13 Class 2 NICs.
Deadline for amending 2010/11 Tax Return.
Last day to file the 2012 Tax Return online without incurring penalties.

For more key tax dates and deadlines visit our 2012/13 Tax Calendar.

QUOTE OF THE MONTH

'The Chancellor is wrong to say that the changes will only affect those at the top of the wage tree. Middle managers in the public and private sectors will get caught in the net.'

Joanne Segars, Chief Executive of the National Association of Pensions Funds, commenting on the Government's plans to cut the annual and lifetime pensions tax allowances.


WEBSITE OF THE MONTH

www.redtapechallenge.cabinetoffice.gov.uk

Business regulation forum inviting contributions from business owners.


ON OUR WEBSITE

View our summary of the 2012 Autumn Statement
The Chancellor's Autumn Statement included significant measures for individuals and businesses. Read our summary here.

Expert advice on managing your business
Our website contains essential advice and information on managing your business. Visit the Your Business area of our website to find out more.

Car parking charges 'should be scrapped' for 2013
The Forum of Private Business is urging local authorities to scrap town centre car parking charges next year, in a bid to support small businesses.
Click here for the full story

Revenue issues warning to late self assessment filers
HMRC is warning taxpayers who have failed to send in their 2010/11 tax returns that they risk having their goods seized, unless they make the necessary payments.
Click here for the full story

New figures reveal rise in inheritance tax receipts
HMRC netted almost £3bn from inheritance tax in 2011/12, the latest figures suggest.
Click here for the full story

Small businesses urged to review their contingency plans
Nearly a quarter of small business owners have failed to review their business continuity plans in the last year, according to a new report.
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Government publishes guidance on PAYE Real Time penalties
The Government has published new guidance on the penalties for filing late and inaccurate returns, for employers operating PAYE via Real Time Information.
Click here for the full story