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Budget 2013 - what you need to know

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  • "Drown your sorrows", "The Laddie's not for Turning", "Osborne pins hopes on housing boom"  - these are just a few of the newspaper headlines that accompanied the announcement of the government's budget on 20 March (there are perhaps a few more juicy quotes to be had off Twitter but I will leave you to search those out - I will give you a clue though - @George_Osborne). 

    So, beneath all the headlines, hype and hyperbole, what does the Budget 2013 mean for family lawyers and their clients?  Here are the key points you need to know:

    Income tax: There is no change in either the basic or the higher rates of income tax BUT 

    • personal allowances will be £9,440 in 2013/2014 and £10,000 in 2014/2015 
    • from 2015/2016, personal allowances will increase in line with CPI
    • the top rate of tax will reduce from 50% to 45% next month
    • there will be a £2,360 reduction in the basic rate band from £34,370 to £32,010 for 2013/2014

    CGT: There are no changes in the CGT rates BUT

    • the annual exemption will be £10,900 in 2013/2014, £11,000 in 2014/2015 and £11,100 in 2015/2016

    Inheritance tax: There are no changes in the nil rate band and will remain at £325,000 until 2017/2018. The IHT exempt amount that a UK domiciled individual can transfer to their non-UK domiciled spouse or civil partner will increase from £55,000 to £325,000 from 6 April 2013. 

    Corporation tax: There will be a single rate of corporation tax of 20% from 2015; in the meantime, the main rate will fall to 23% in April 2013 and to 21% in April 2014. 

    Employment allowance: businesses and charities will, from 2014, have an allowance of £2,000 to set against their employer National Insurance contributions

    Employee shareholder status:  A new employee shareholder status will be introduced from 1 September 2013 under which employee shareholders will have different employee rights. They will need to hold shares in their employer worth a minimum of £2,000 and gains on up to £50,000 of qualifying shares will be CGT exempt.

    Childcare: a new tax fee childcare scheme will be introduced from autumn 2015 to provide 20% of childcare costs up to £6,000 per child per year for children under 12 years old. Initially, the system will only apply to all children under five. It will be available to working parents who are not in receipt of tax credits or universal credit  and provided neither parent earns over £150,000 a year and will operate as a voucher to which both parent and government contributes. The current employer supported childcare will be phased out for new applicants from autumn 2015.

    State pension: a new single tier state pension will be introduced in April 2016. The state second pension will close and contracting out will be abolished.

    Pensions: The lifetime allowance for pensions will reduce from £1.5million to £1.25million  for 2014/2015 and the annual allowance for pension contributions will reduce from £50,000 to £40,000 for 2014/2015. From 6 April 2013, the tax and NIC incentives for employees and employers will be removed from arrangements which allow an employer pays a pension contribution into a registered pension scheme for an employee's spouse or family member as part of a flexible remuneration package. The capped drawdown limit for pensioners will rise to 120% of the value of an equivalent annuity from 26 March 2013

    Stamp duty: Stamp duty will be abolished for shares listed on exchanges such as AIM from April 2014

    Government backed mortgages: In an effort to increase the supply of low deposit mortgages (for credit-worthy households of course), there will be a government backed mortgage guarantee scheme introduced in January 2014. 

    Anti-avoidance: Lots of anti-avoidance measures including the new "General Anti-Abuse Rule" will come into force. The GAAR is designed to tackle aggressive but legitimate tax avoidance.

    Statutory residence test: From 6 April 2013, a statutory definition of "tax residence" for individuals  will apply and the concept of "ordinary residence" will be abolished for most tax purposes. This has been well publicised; the new rules work on a tick-box basis and refer to the number of days spent in the UK in a tax year as well as a number of "factors" an individual satisfies if their days in the UK are too many for them definitely not to be UK resident by too few to be definitely a UK resident. An important one for international clients.

    Residential property valued at £2million+: an annual residential property tax ("ARPT") will be introduced from 1 April 2013 for residential properties valued at more than £2million that are held by certain "non-natural persons" i.e. companies. Exemptions will be introduced for, for example, charities. CGT (at the rate of 28%) will be charged on gains accruing after 5 April 2013 on disposals by certain non-natural persons of UK residential property that has been subject to the ARPT. Reliefs will also be introduced to the 15% rate of stamp duty land tax on residential property valued at more than £2million and purchased by certain non-natural persons. This one may be relevant to wealth protection measures which use a corporate structure as well as to those so-called "big money divorces" and Schedule 1 cases where there is an international element.


Published: 22/03/2013

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