The 2012 Budget: Tax Planning

The 50p rate of tax did not collect as much tax as anticipated as high wealth individuals accelerated their earnings in 2011 to take advantage of the 40p tax rate before it was raised. Now, one year on, high earners will be looking to defer their income to April 2013 to take advantage of the new 45p rate of tax.

People who run their own business will be able to defer paying themselves a bonus or a dividend to 2013. Similarly, people with savings will seek to invest in products that pay taxable income after April 2013. High earning employees on PAYE could look to increase their pension contributions in 2011/12 and thereby reduce their earning subject to the 50p top rate of tax.

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2012 Budget Highlights

Budget Highlights

• Rise in Income Tax Threshold to £9,205 in 2013
• 50p top rate of income tax reduced to 45p from April 2013
• Tax reliefs claimed by individuals capped at 25% of total income
• Main rate of Corporation tax cut to 24%
• Age related allowances to be frozen in what has been dubbed the “Granny Tax”
• New 7% Stamp Duty Land Tax (dubbed the “Mansion Tax”) on properties worth over £2m
• No planned restrictions to pension contributions as initially proposed

For more details and analysis of the 2012 budget, please refer to our latest news section.

HMRC Targets Tradesmen who do not submit Tax Returns

The HMRC has announced that it will run campaigns this year to target higher rate taxpayers who fail to submit tax returns. In particular the HMRC have indicated that they will target tradesmen working in home improvement and direct selling businesses. Roofers, carpenters and joiners have been identified as key group the taxman will be pursuing for underpaid and undeclared tax. However, the HMRC will take a more lenient approach to taxpayers who make voluntary disclosures.