The Chancellor announced his 2012 Budget on 21 March. The following are some of the major announcements which are relevant to the self employed and small business:
Income Tax
The personal allowance threshold is due to increase to £8,105 from 6 April 2012. It is set to increase to £9,205 from April 2013.
The 40% tax rate is reached in the 2011-12 tax year when income is £42,475. This is the same in the 2012-13 tax year, but will be £41,450 for 2013-14.
The top tax rate of 50%, payable on income in excess of £150,000, is to be cut to 45% from April 2013.
National Insurance
No major changes
Corporation Tax
The main rate of corporation tax, which applies to profits in excess of £300,000, is currently 25%. It will reduce from next month to 24%, and will fall to 22% by 2014.
Other Issues
A consultation has been announced in respect of simplifying the tax system for small unincorporated businesses with a turnover up to £77,000, enabling them to use a cash basis. This is in response to the Small Business Tax Review published by the Office for Tax Simplification in February 2012, and would be a major change from the fundamental ‘accruals’ approach which is currently used.
Also, effective from January 2013, details of the loss of child benefit have been clarified. Previously, it was to be lost completely if one earner in a household had income over the 40% band (approx. £42,000). This has now been set at £50,00, but it will be lost gradually at a rate of 1% for every £100 additional income, so that it will be completely lost when one person is earning over £60,000. However, it does appear that it can still be received if two earners are both receiving £49,000, so there are opportunities to retain it if you are self employed, by trading through partnerships or limited companies (as appropriate to your circumstances).
