How will the 2012 Budget affect your business?

The Chancellor of the Exchequer, George Osborne, presented the 2012 Budget on 21 March 2012.

Budget 2012 maintains the Government’s strategy and sets out further action it will take in three areas: a stable economy; a fairer, more efficient and simpler tax system; and reforms to support growth.

Key announcements for business

  • The main rate of corporation taxwill be reduced by an additional one per cent, so that the rate will reduce from 26 per cent to 24 per cent in April 2012, to 23 per cent in April 2013 and will come down to 22 per cent by April 2014.
  • Corporation tax reliefs will be introduced from April 2013 for the video games, animation and high-end television industries, subject to state aid approval and following consultation.
  • The top rate of income taxwill be reduced from 50 per cent to 45 per cent in April 2013, and individual’s income tax personal allowance will increase at the same time by a further £1,100, taking it to £9,205 in total.
  • A cap will be introduced on all unlimited income tax reliefs, of £50,000 or 25 per cent of income, whichever is higher.
  • Following the Office of Tax Simplification review of small business taxation, the Government will consult on introducing a voluntary cash basis for unincorporated businesses up to the VAT registration threshold; a simplified expenses system for business use of cars, motorcyles and home; and the possibility of a disincorporation relief.
  • From 1 April 2012, the VAT taxable turnover threshold, which determines whether a person must be registered for VAT, and the registration and deregistration threshold for relevant acquisitions from other EU Member States, will be increased from £73,000 to £77,000; and the taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £71,000 to £75,000. The simplified reporting requirement (three line accounts) for the income tax Self Assessment return will continue to be aligned with the VAT registration threshold.
  • Sunday trading lawswill be relaxed during the Olympics and Paralympics, to allow retailers to make the most of the occasion.
  • The Government accepts the Low Pay Commission’s recommendation for a below inflation increase in the National Minimum Wageto support employers and help protect jobs.
  • The Enterprise Management Incentive scheme, which helps SMEs recruit and retain talent, will provide additional support to help start-ups access the scheme and more than double the grant limit to £250,000, subject to State Aid approval.
  • Selection of Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, London, Manchester and Newcastle has been confirmed to become broadband super-connected cities, as part of the £100 million investment announced at 2011 Autumn Statement. £50million will be used to fund a second wave of cities.
  • The Government will support the establishment of a new Pension Infrastructure Platformowned and run by UK pension funds, which will begin its initial £2 billion investment in UK infrastructure by early 2013.
  • A strategy for gas generationwill be published in the Autumn, recognising that gas-fired electricity generation will continue to play a major role in UK energy supplies for the next decade and beyond.
  • A package of tax measures will be introduced to secure billions of pounds of additional oil and gas investmentin the UK Continental Shelf.
  • Aviation tax in Northern Ireland – from 1 November 2011, the Air Passenger Duty (APD) ratesfor direct long haul flights departing from Northern Ireland were cut to the short-haul rate (£13 per passenger in economy and £26 per passenger in business and first class, from 1 April 2012). The power to set APD rates for direct long haul flights departing from Northern Ireland will be devolved to the Northern Ireland Assembly (Finance Bill 2012). This will protect the vital direct air service to the US and offers a chance for the development of new long haul services, supporting business and tourism.
  • Aggregates levy– the Government is delaying the planned increase in the aggregates levy rate from £2.00 to £2.10 per tonne until 1 April 2013. This will avoid putting additional pressure on the aggregates industry in Northern Ireland, following the suspension of the aggregates levy credit scheme (Finance Bill 2013).
  • The first Enterprise Zone in Northern Ireland will be introduced.

You can find full details of the Budget 2012 announcements on the HM Treasury website, HM Revenue & Customs website and Department for Business Innovation & Skills website.