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.

From October 2012, all employers must automatically enrol staff (with only a few exceptions), into a pensions scheme, and provide an employer’s contribution. In time, this will also apply to any family that employs a nanny (if earnings exceed a threshold), and the likes of builders who have a couple of full or part time workers.

With an aging population, and small businesses making up 99.3% of all businesses in the UK, the purpose of NEST (National Employment Savings Trust), is to make it easier to save for retirement. Thousands of small businesses do not realise the impact of the ruling, and the extra cost it will incur to their business.

How much will it cost?

The government encourages you to save for your retirement by giving you tax relief on pension contributions. New regulations brought out earlier this year will allow everyone to contribute up to £50,000 per year and receive full tax relief at up to 50%. That includes high earners.

For those earning less than the £130,000 threshold, a financial contribution under the outgoing rules of up to £255,000 may be possible. To ensure that the Pension Input Period (PIP) allows this, careful consideration will be required.

The report outlined some key changes to be aware of: