One of the sure signs of becoming a grumpy (50 year-) old man is that you become convinced that things aren’t what they used to be in the good old days. I plead guilty as charged on this count in the realms of football (greed, cheating, financial recklessness etc) and music (don’t get me started on the X Factor), and also to some extent tax.

Tax policy used to be a relatively straightforward thing to keep track of. The Chancellor would stand up in early March and tell you what the tax system would look like for the next tax year. None of the following applied:

1. Blocking of tax avoidance schemes on a ‘real-time’ basis.

2. Pre-budget reports in November each year.

3. Announcing what the tax system would look like years in advance.

4. Endless consultation documents.

Now things are much more complicated. So, on fiscal New Year’s Eve, I thought it would make sense to summarise briefly what the tax system will look like for 2012-13, and in what respects it has changed from 2011-12, in case, like me, you get thoroughly confused about what changes are being introduced when. Figures in brackets are 2011-12 equivalents.

Income Tax

Rates unchanged at 20%, 40% & 50%, and for dividends 10%, 32.5% and 42.5%.

Personal allowance £8,105 (£7,475)

Upper limit of the basic rate band £34,370 (£35,000)

New Seed Enterprise Investment Scheme offering 50% income tax relief on investments up to £100,000.

Enterprise Investment Scheme individual investment limit raised to £1 million (£500,000), subject to EU State Aid aproval.

Enterprise Management Incentive Scheme individual limit on value of options raised to £250,000 (£120,000).

Remittance basis tax charge for those resident in the UK for 12 or more of the last 14 years to be £50,000 (£30,000).

New child benefit income tax charge effective from 7 January 2013 for couples where the higher earner has income of at least £50,000 per year. 1% of child benefit is withdrawn for each £100 of that person’s income up to £60,000.

Car fuel benefit charge multiplier increases to £20,200 (£18,800).

Corporation tax

Main rate falls to 24% (26%) with the marginal rate consequently falling to 25% (27.5%).

The research and development expenditure enhancement percentage rises to 225% (200%). For R & D tax credits, the restriction to the amount of PAYE and national insurance paid for the year is removed. The £10,000 minimum expenditure condition is also removed.

Capital gains tax

2012-13 capital gains re-invested into qualifying Seed Enterprise Investment Scheme shares are exempted from capital gains tax. SEIS shares themselves will also be exempt from CGT once held for 3 years.

Inheritance tax

No major changes.

National insurance

Class 1 (employed)

Lower earnings limit £107 per week (£102) – the point at which benefit entitlement starts

Primary threshold £146 per week (£139) – the point at which employees start paying contributions

Secondary threshold £144 per week (£136) – the point at which employers start paying contributions

Class 2 (self-employed – flat rate)

£2.65 per week (£2.50)

Small earnings exception £5,595 per year (£5,315) – the profit level below which Class 2 contributions need not be paid.

Class 3 (voluntary – flat rate)

£13.25 per week (£12.60)

Class 4  (self–employed – profit-related)

Lower profits limit £7,605 (£7,225)

Value Added Tax

Registration threshold £77,000 (£73,000) from 1.4.12

Deregistration threshold £75,000 (£71,000) from 1.4.12

New scales for private fuel effective from 1 May 2012

From 1.10.12, some standard-rating of previously zero-rated items, such as:

Approved alterations to listed buildings

Self-storage

Some hot food for takeaway purposes

Some sports drinks

Hairdressers’ chairs

Cold food for consumption on suppliers’ premises shared with others

Holiday caravans

Stamp Duty Land Tax

From 22.3.12, stamp duty land tax on residential properties where the chargeable consideration for a sale is £2 million or more will be 7% (5%).

From 21.3.12, stamp duty land tax on  residential properties where the chargeable consideration for a sale is £2 million or more purchased by certain non-individuals will be 15% (no true comparable figure).

So, in the interests of clarity (in two senses), I have completely ignored anything that is not due to come into effect until April 2013 or later for the purposes of this post.

Returning to the ‘grumpy old man’ theme, I have just e-mailed one of my colleagues a devastating critique of the state of the nation going forward, with profoundly depressing conclusions particularly for those unfortunate enough to be young at this particular time. I am not sure it has a place in this blog, but I think I surprised even myself with how pessimistic I am about the future. I see nothing in the conduct of government tax and environmental policy (lets get back to the points of this blog!) to encourage me to believe that there is a coherent long-term vision of how to deal with the many problems, whether economic, climatic, demographic or environmental, with which we are beset at the beginning of the 21st century. So there’s a cheerful thought for the New Year!

Which leaves only my New Tax Year’s Resolutions. Which need to be to make my own, my church’s and the firm’s environmental stance more comprehensive and clear-cut, and our respective carbon footprints smaller. Being pessimistic about the future doesn’t mean we shouldn’t try to do something to improve it, in our own small way. Lots of our own small ways add up, I guess, to a big way. 

Happy New TaxYear!

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