Larsen & Co


Budget News 2013

On 20 March 2013 the Chancellor presented his latest budget. Highlighting continued concerns over the economic outlook for the country and the continued deficit, this is set to increase by a further £114bn this year.
One of the highlights is reaching the personal allowance threshold of £10,000 one year ahead of target, taking many people out of tax altogether.

Business tax and investment incentives

Corporation tax
The Chancellor announced further cuts to the main rate of corporation tax which is currently at 24% and already set to decrease to 23% from 1 April 2013. This will be reduced again from 1 April 2014 to 21% and then come into line with the small companies rate of 20% from 1 April 2015.

Annual investment allowances
On 1 April 2012 this decreased from £100,000 to £25,000 and was then increased on 1 January 2013 for a temporary period of 2 years to £250,000. For companies spanning both changes this may lead to some complications in calculating annual investment allowances.

Research and development
As part of the UK’s commitment to further research, the research and development relief has been extended further. From 1 April 2013 there will be a tax credit available for large companies making R&D expenditure and also making losses of 10%. The credit is optional, however from 1 April 2016 it will become compulsory.

Small business
A new accounting scheme is being introduced from 6 April 2013 to allow cash basis for calculating profits for businesses with a turnover of up to £79,000. Once using this basis for accounting they can continue to do so until their turnover reaches £158,000.

At the same time unincorporated businesses will be allowed to deduct certain expenses on a flat rate basis.

Disincorporation relief
From April 2013 a new disincorporation relief is being made available to companies that want to transfer to a partnership or sole trader. The relief will allow the company to transfer land and goodwill to the shareholders without corporation tax arising, providing the total value of qualifying assets does not exceed £100,000.

Employment allowance
From April 2014 all businesses will be entitled to a £2,000 employment allowance, to be deducted against employers national insurance contributions. The deduction will need to be made through the normal payroll that employers carry out.


New limits have been introduced for registration and de-registration of £79,000 and £77,000 respectively.

Personal Tax

Personal allowances
As was previously announced the main personal allowances will increase from £8,105 to £9,440 on 6 April 2013 and a further increase to £10,000 on 6 April 2014.

NI and Tax
There will be a consultation on the proposal to collect class 2 national insurance contributions through the self assessment system.

Pension’s tax relief is to be decreased to an annual allowance of £40,000 and a lifetime allowance of £1.25m.

There will be a new single rate of pensions from April 2016 of £144 for everyone who qualifies for a full state pension. This change is a year earlier than originally planned, and will see the end of the state second pension.

Cars and fuel

Benefit in Kind
The car and fuel benefits are calculated by applying the appropriate percentage to the list price of the car or the fuel rate of £21,100 from 6 April 2013. These rates are increasing each year by lowering the CO2 emissions bands.

The fuel scale charges for private fuel have increased and depend on the CO2 emissions of the car.


Gift aid
From 6 April 2013 the administration burden on small donations will be lifted. Currently in order to claim back the tax on small donations a form has to be completed for every donor. However from 6 April 2013, for small donations up to £5,000 in total, charities will be able to claim gift aid without the need for a gift aid declaration. This will be particularly beneficial for collecting cans and church collection plates and will apply to individual donations of £20 or less.

Employee Shareholder Status

From 1 September Companies will be allowed to offer up to £50,000 worth of shares to employees in return for losing some of their employment rights. The first £2,000 of these shares will be exempt from tax and NIC’s and the full £50,000 will be exempt from capital gains tax.


A new childcare scheme has been announced to replace the existing employer supported childcare. The scheme will initially be opened to parents of children under 5 where both parents work, earn less than £150,000 and do not claim tax credits. It will be extended to children under 12 over a period of time and will be worth up to £1,200 per child.

Homebuyers help to buy scheme
In his speech, the Chancellor launched Help to Buy. Under the loans scheme, a buyer hoping to purchase a newly built home will be able to take out a mortgage for just 75% of the cost of the property, provided they can stump up a 5% deposit.
Those who qualify will be eligible for an "equity loan" worth up to 20% of the value of the property, funded by the government, which will be interest-free for the first five years. After this there will be an annual fee of 1.75%, which increases annually by the retail prices index inflation plus 1%. The loan can be repaid at any time or on sale of the property.
This scheme will run for 3 years from 1 April 2013.
A second scheme has also been announced for both first time buyers and home movers on both new build and existing properties up to £600,000. Again the buyer needs a deposit of 5% and the government will provide a mortgage guarantee to enable people to get the home loan they require. This scheme will start in January 2014.