GPs and The Budget 2012

Chancellor George Osborne promised a Budget that rewards work, backs business and is on the side of aspiration.

But there were no tax giveaways – any cuts in what GPs have to pay to HM Revenue and Customs are to be paid for by increases elsewhere.

Here’s a round-up of the main changes:

Personal Allowance

The tax free personal allowance is £8,105 for 2012/13 and will be £9,205 for 2013/14.

But most GPs take a hit as their personal allowance tapers away when their income exceeds £100,000. The marginal rate of income tax in 2012/13 is much higher than many realise. Effectively it is a whopping 60% on income between £100,000 and £116,210.

The age allowance will wither on the vine. The allowance for individuals aged 65-75 is £10,500 for 2012/13 and will not rise thereafter. For individuals aged 75+ it will be £10,660 for 2012/13 and will not be increased.

Higher Rate Threshold

The higher rate threshold, at which the 40% rate starts to bite, will be reduced from £42,475 in 2012/13 to £41,450 in 2013/14.

Top Rate of Tax

The 50% rate on income above £150,000 will continue for 2012/13, and reduce to 45% in 2013/14. No further reductions have been announced so far.

Child Benefit

From 2013/14, Child Benefit will be effectively tapered away when the higher earner in the household earns more than £50,000. The Benefit will be gradually reduced to nil as income reaches £60,000. The Benefit payment itself will not reduce, but will be clawed back through an additional income tax charge.

Company Taxation

Corporation Tax Rate

Further reductions will be made to the main rate of corporation tax, as follows:

  • from 1 April 2012 – 24% (an additional 1% reduction on the rate previously announced)
  • from 1 April 2013 – 23%
  • from 1 April 2014 – 22%

The small profits rate will remain at 20% from 1 April 2012.

Employment tax

Cars

The scale charges for cars provided to employees will be increased by one percentage point from 2012/13, subject to a maximum of 35%, and by a further two percentage points from 2015/16, subject to a maximum of 37%

The fuel benefit charge will be increased to £20,200 x the car benefit percentage from 2012/13.

Share Option Schemes – Enterprise Management Incentives (EMI)

From 6 April 2012, the limit on the value of shares that can be awarded through an

EMI share option will be increased from £120,000 to £250,000.

Shares acquired after 6 April 2012 will qualify for Entrepreneur’s Relief, and benefit from the 10% rate of Capital Gains Tax.

Indirect taxes

VAT

From 1 April 2012, the VAT registration threshold will increase from £73,000 to £77,000 and the VAT deregistration threshold will increase from £71,000 to £75,000.

The Finance Bill 2013 will introduce legislation to include certain NHS bodies in the section 41 refund scheme.

Stamp Duty Land Tax on Residential Property

From 22 March 2012, SDLT on the purchase of a residential property exceeding £2 million will be charged at a rate of 7%.

Additionally, SDLT on the purchase of such property by certain types of companies, collective investment schemes and partnerships will be charged at a higher rate of 15%. This measure will take effect from 21 March 2012.

In the latter case, the government will also consult on the introduction of an annual charge on such properties with a view to introducing new legislation from April 2013.

Other Budget announcements

Tax Simplification

The Government is proposing to allow small unincorporated businesses to use the cash basis of accounting. This will apply from April 2013 to businesses operating below the VAT threshold.

Tax Avoidance

General anti-avoidance rule

The HMRC’s interest in doctors shows no sign of diminishing. Now a General Anti Avoidance Rule is to be introduced in April 2013 to tackle ‘artificial and abusive tax avoidance schemes’. Draft legislation will be published as to what this means in practice and a consultation process will follow.

IR35

The so-called ‘IR35’ rules will be clarified and tightened up. These rules apply to individuals providing their services through limited companies. The updated rules will be published later this year and will apply from April 2013.

Cap on Tax Reliefs

From 2013, the maximum saving from certain types of tax relief will be capped. This will not apply to pension contributions or Enterprise Investment Scheme investments. The cap will be the greater of £50,000 and 25% of income.

Income tax and NIC rates and allowances for 2011/12 and 2012/13

This document is produced for general guidance only. Personal advice should always be sought before taking any action. No responsibility is accepted by the author or the publisher for actions taken or refrained from being taken as a result of reading this document. Tax legislation and interpretation change continuously and the information herewith is only accurate at the time of writing

Should you require any further information or advice arising from reading these guidelines please do not hesitate to contact your nearest AISMA member.

Prepared for AISMA by Moore and Smalley LLP

(c) Moore and Smalley LLP