Budget 2013 Highlights

Budget 2013 – A Budget for the ‘Aspiration Nation’

Chancellor Osborne hailed the UK an ‘aspiration nation’ and his Budget was designed to help those who wanted to work hard and encourage employment in the UK.

The economics in brief:

• Chancellor confirmed the debt targets had been missed and he would be borrowing more than planned, although public sector net borrowing is forecast to fall by one third over the three years from 2009/10 to 2012/13.
• Growth forecast was revised down for 2013 from 1.2% to 0.6% and 2% to 1.8% for 2014.
• More subdued and uneven recovery than expected.
• Budget designed to help those who want to aspire and work hard.

Personal taxation

In one of the most hotly anticipated announcements, Chancellor Osborne confirmed that the personal tax-free allowance would increase to £10,000 from April 2014, up from the 2013/14 allowance of £9,440.

However, some of this has been clawed back by the reduction of the basic rate personal tax threshold from £32,010 in 2013/14 to £31,865 from April 2014. The higher rate threshold will increase slightly from £41,450 for 2013/14 to £41,865 for 2014/15.

Statutory Residency Test

A statutory residency test is to be introduced via the Finance Bill 2013 to introduce a new statutory definition of the tax residence status for individuals. Previously this has been difficult area to advise, the new rules will bring clarity which with a more mobile workforce and employment in various countries during a tax year will bring certainty on income and gains for individuals.

Childcare

The Chancellor reminded us of the measure announced yesterday providing 20% tax relief of up to £1,200 per child towards the costs of childcare. Conditions are that both parents must work, not receive support through tax credits and neither parent earns over £150,000 pa. It is expected that this scheme will be open to around 2.5 million working families in the UK.

Pensions

From 2014/15 the annual allowance will reduce to £40,000 pa with the lifetime allowance reducing to £1.25m. This is a better than expected result given the rumours that the annual allowance would fall to £30,000! The measure is designed to rebalance the amount of tax relief benefitting higher earners.

Seed Enterprise Investment Scheme

The scheme is to be extended for capital gains tax in gains accruing in 2013-14 which are reinvested during 2013-14 or 2014-15. The relief will apply to half the qualifying amount re-invested..