We present a round-up of predictions from our Budget 2013 sponsor TaxCalc and other tax experts. Now it’s your turn.
Because of the Coalition government’s new approach to tax policy making, the run-in to this year’s Budget has seen a revival of guesswork and a slew of predictive press releases. This digest presents predictions from TaxCalc’s Steve Checkley and Alex John and rates them according to the support they have gained from other tax commentators.
Have a look, and tell us whether you agree with the experts, or put forward your own predictions and proposals for taxation reform.
During his speech on Wednesday, the Chancellors is allowed to refresh himself with alcoholic drinks – no other Member of Parliament can do this. But experience tells us George is more likely to drink water throughout the Budget. What is much more certain is that he will mention the word “tax”.
If you can correctly predict the number of times he says the magic word, you could win an Apple iPad mini in TaxCalc’s Budget sweepstake - follow the link to enter now!
Meanwhile, let’s move on to more serious predictions…
Corporation tax rates
The main rate of Corporation Tax has already decreased by 5% over the past five years and is due to decrease even further to 21% by April 2014. There is a lot of speculation that there will eventually be one corporation taxn rate, when the main rate matches the small company profit rate of 20%. The 2013 Budget could see this date finally announced and perhaps even brought forward, alternatively but far less likely, the small profit rate could be decreased for 2013 as this has not yet been announced.
Pundit rating: ★★★★★
Francesca Lagerberg, Philip Fisher, BDO and Blick Rothenberg all fancy this one.
Income tax rates and allowances
Like corporation tax, income tax rates have already been announced in recent Budgets. The biggest change – already set to happen – is the decrease in the additional rate, where earnings over £150,000 will be taxed at 45% rather than the current 50%. It is highly unlikely this change will be affected by the upcoming Budget. On the other end of the earnings scale, the personal allowance is already due to increase from £8,105 to £9,440. Any further increases announced at the Budget will likely be beneficial to employees (especially those on lower incomes), as the Coalition has previously stated they would like the personal allowance to be £10,000 before 2015. In parallel, any increases in the personal allowance may see the income level at which an individual pays higher rate tax decrease, negating any benefit for those earning at the higher rate level or above.
Pundit rating: ★★★
Rebecca Benneyworth and Blick Rothenberg think so too, but Smith & Williamson’s Richard Mannion insists the personal allowance won’t go higher than £9,500.
National insurance contributions
The Autumn Statement announced there would be no changes to the percentage rate of contribution for Class 1 and Class 4 national insurance contributions (NICs) in 2013/14 but there would be changes to all the thresholds and limits. Along with the usual annual rises, some commentators believe there could be an increase in store for the self-employed, who are currently enjoying a lower rate than the employed as they receive fewer pension benefits. However with the introduction of a flat rate state pension, an increase in self-employed contributions could simplify the rules.
Pundit rating: ★★★
Some support for variations in the NIC/income tax rate formula from the likes of Richard Mannion, BDO and Blick Rothenberg.
Small business tax reliefs
To boost the economy and get businesses spending, small businesses must be given more reliefs. The new cash accounting scheme will be available from April to simplify record keeping and taxes. Will the Chancellor introduce any further savings for small businesses? The annual investment allowance has been increased tenfold to £250,000 from 1 January 2013 for two years – further changes may be in the pipeline for capital allowances, especially around environmentally friendly assets.
Pundit rating: ★
Francesca Lagerberg agrees, but not BDO, nor Rebecca Benneyworth. “Please God, no!” she wailed. “The last thing we want is constant change. What small business and their advisers want is to be left alone for a bit. The rules on the transition to the higher AIA are a nightmare.”
Overall the TaxCalc team anticipates “no big surprises” in the Budget, especially following changes already introduced with the Autumn Statement, such as the increase in the Annual Investment Allowance.
“On a personal note we would like to see the increases in alcohol duty frozen for champagne – the ladies at TaxCalc have a particular penchant for a glass of bubbly,” added Checkley and John.
Consultations awaiting action
Merging operation of income tax and NICs - a popular idea among AccountingWEB members that was pushed to the back burner in December’s Autumn Statement. The government said it will defer any further action until it can assess the progresss of planned operational changes to the tax system.
Anti-avoidance - “We will be publishing our comprehensive strategy to tackle offshore tax evasion in Spring 2013,” promised Treasury minister David Gauke last month. Secondary legislation is also due “later in 2013” on extending the disclosure of tax avoidance schemes following the publication of HMRC’s consultation response in December. An ideal opportunity for political posturing on Budget day.
AccountingWEB’s hot tips
IR35 - The Chancellor could answer the PCG’s call for detailed guidance defining which office holders will be considered to be part of IR35 under revisions in the Finance Bill 2013.
Unapproved employee share schemes - Will Chancellor implement recommendations of OTS review?
HMRC Agent strategy - New online tools may be announced as part of revamped, adviser-friendly approach.
Can the collective wisdom of AccountingWEB members trump the experts? Let us know your top tips and Budget wishlist items below and we’ll be sure to keep an eagle eye on developments in those areas during the next week.