This month’s blog is of course about the budget, providing you with the headlines, and an explanation of what it really means for you and your business.

Last week, the Office for Budget Responsibility revised the growth forecast for 2012 from 0.7% to 0.8%, a small, yet positive change following its downgrade in the Autumn Statement.  The forecast for 2013 increases to 2%, then 2.7% in 2014, and 3% for each of the two following years.

Personal Income Tax Allowance Raised – as of April 2012, the personal income tax allowance will be increased to £9,205.  According to the government, this will put an additional £220 a year into the pockets of 24 million people.  And who’s footing the bill for this?  That would be the 300,000 more people who will be forced into the 40% tax band.

40% Tax Band Threshold Lowered – as of 2013/14, the 40% tax band will be reduced from £42,475 to £41,450, meaning a greater proportion of earners being drawn into the higher tax bracket.

High earners beware as 50p top tax rate is cut to 45p – as of April 2013, the top rate of tax will be cut to 45p.  

Taxes on the rich will reputedly raise five times more money that the 50p tax.  Now is the time to plan and seek advice.

Business

There were a number of changes announced last week affecting small businesses.  Many of these are administrative, but there are some actual tax changes too.  A document published alongside the Budget pack clearly identifies these changes: Making tax easier, quicker and simpler for small businesses.

If you’re a tutor or coach earning an income that is not included on your Self-Assessment tax return, then the Tax Catch Up Plan is for you.  The plan allows you to tell the HMRC about this income, and pay what you owe.  

In order for you to benefit from the best possible terms, your intension to take part had to be registered by 6 January 2012.  If you have done this, you now have until the 31 March 2012 to disclose unreported earnings.  If you haven’t yet notified them, you can do so by contacting the Tax Catch Up Plan helpline on Tel: 0845 601 8817 – they will advise you on the best course of action.

The HMRC sent out Section 16 notices to colleges last October, for information about private tutors as part of the crackdown.  This band not only includes the traditional academic areas, but also the likes of fitness and dance instruction, music teachers, and services such as life coaches.  You can also use the Tax Catch Up Plan to tell the HMRC about tax you owe in respect of anything else such as capital gains or rental income.

Electricians Tax Safe Plan proves a shock

The HMRC has written to some 50,000 electricians, alerting them of the penalties or criminal charges if they fail to disclosed true earnings.  Electricians are the focus of HMRCs latest tax evasion

As of April 2012, the maximum amount of annual investment allowance (AIA) reduces to £25,000. Currently, businesses can write off 100% of the cost of acquiring qualifying assets against their taxable profits up to an annual limit of £100,000.

The revisions to the measure will take effect from 1 April 2012 for businesses within the charge to Corporation Tax (CT), and 6 April 2012 for businesses within the charge to income tax.

Businesses that invest over £25,000 will continue to be eligible for plant and machinery writing-down allowances on expenditure not covered by the AIA.

Assets that can be written off in this way include plant and commercial vehicles, computers and other equipment, however, cars do not qualify.

Things to consider prior to April 6th:

There are approximately six million of us in the UK who are due to receive refunds to an average of £400, and some reaching the £1,000s. This finding follows the annual check of who paid what, which also uncovered the one million people who have not paid the right amount of tax, owing an average of £600.

This is not the first time these inconsistencies have been uncovered. It follows the introduction of a new computer system at the HM Revenue and Customs, which is tracking down reconciled cases dating back many years. The good news is that anyone owed money will be paid back with interest without the need to contact them (although they do not give a timeframe for this!).

As the first letters start to find homes across Britain, here are some valuable need-to-knows:

• WHAT IS A TAX CODE?
  • These are a series of digits which tell your employers how much tax to deduct. One of the most common is the 747L code. Add a five to the end of the numbers (£7,475) and you’re presented with the amount you can earn before income tax is taken.

• THE WRONG POSTAL ADDRESS MEANS YOU WILL MISS THE REBATE
  • The HMRC must have the correct address for you in order to post out your tax rebate. If you’ve moved, or assume that your employer updates the address, think again. Update your address here: HMRC address update form