(Sunnyvale, CA) – UK’s annual budget revealed a string of tax measures including a reduction in business tax to 24% with further 1% cuts announced until 2014, while the top personal income tax rate will be reduced to 45% from 50% in 2013.
The 2012 Budget presented by finance minister, George Osborne, on March 22, 2012 also announced changes in capital allowances for plant and machinery, low emission cars and certain enterprise zones.
The threshold for VAT registration for UK based companies has been increased from £73,000 to £77,000 effective April 2012, while the VAT threshold for non-UK companies will be removed in December 2012 affecting VAT compliance requirements of foreign businesses.
Important UK Income Tax Announcements
UK Business Tax Rates
* From April 2012, the main rate of Corporation Tax will be reduced to 24% (from 25%), with further yearly reductions of 1% until it reaches 22% in 2014. The small profits rate of corporation tax will remain at 20%.
* Previously announced changes to the rates of capital allowances will take effect from April 1, 2012 e.g. Plant and machinery in the main pool will attract reduced writing down allowances at a rate of 18% instead of 20%.
* Additional capital allowance to be granted to designated enterprise zones from April 2012 in Scotland, North Wales and London.
* Extension of capital allowance for low emission cars – The first-year allowance has been extended for two years to March 31, 2015. Also the 110g/km threshold will be reduced to 95g/km from April 1, 2013.
* The Enterprise Management Incentive scheme, mainly applicable to share option schemes provided by small and medium sized businesses, will be expanded with limits for individual employees increasing from £120,000 to £250,000.
* New controlled foreign companies (CFC) provisions to be introduced in Finance Bill 2012, with new provisions likely to be effective for year beginning January 1, 2013. The CFC provisions will aim to tax artificially diverted profits from the UK.
* Certain anti-avoidance provisions are introduced in relation to capital allowance for Plant and Machinery.
* General Anti-Abuse Rules (GAAR) to be introduced from April 2013 to curtail abusive and aggressive tax planning schemes.
UK VAT Compliance
* VAT registration threshold has been increased from £73,000 to £77,000. This is effective from April 2012.
* The VAT registration threshold for businesses not established in the UK will be removed from December 2012.
UK Personal Income Tax Rates
* The top rate of Income Tax to be reduced from 50% to 45% from April 2013.
* Personal allowance will be increased by £1,100 to £9,205 from April 2013.
* The dividend additional rate will be reduced to 37.5% (from 42.5%). Thus, the effective tax rate on dividends will be 30.55% after the dividend tax credit.
* A cap on income tax reliefs claimed by individuals will be set from April 2013. The cap will be applicable for individuals claiming a tax relief of more than £50,000 and will be set at 25% of the income.
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