2013 Budget Highlights

Treasury Chancellor George Osborne has announced his 2013 Budget today. Here is the summary of the Budget:

• An increased income tax allowance from £9,440 in 2013 to £10,000 from April 2014, an increase which is one year earlier than expected.
  
  
• The main rate of corporation tax will be cut from 23% in 2013 to 22% in 2014, then down to 20% from April 2015.
  
  
• Around 450,000 small businesses will pay no Employer National Insurance after the introduction of a new Employment Allowance.
  
  
• The economy is expected to grow by 0.6% in 2013, which is half of the previously forecasted 1.2%.
  
  
• In the future anyone wanting to buy a new-build property will be able to access a 20% government loan as long as they have a 5% deposit.
  
  
• A crack down on tax avoidance will bring in £4.6bn over the next five years.
  
  
• The planned 3p rise in fuel duty has been discarded; the price of beer will be reduced by 1p per pint.

Whilst the 2013 budget did not bring any huge surprises, George Osborne placed emphasis on helping businesses to grow and establishing the UK as the most attractive place to innovate and do business. SME’s will be provided assistance to create jobs and the reduction of the main rate of corporation tax to 20% by 2015 will result in the UK having one the most competitive rates in Europe. This is a welcome move given the backdrop of weak economic growth in the UK.

A more detailed analysis of the Budget will follow. Please monitor the website for updates. Belsize Accountancy are specialist accountants for contractors and small businesses.

Small Businesses Must Prepare For RTI Effective April 2013

The HMRC will launch the new Real Time Information (RTI) System, effective from April 2013. Research has found that many small businesses are not adequately prepared for the new rules which will require changes to their current payroll systems. Most employers and pension providers will be legally required to submit PAYE information in real time from April 2013 and all employers must do so by October 2013.

The new RTI rules require all employers to make online submissions to HMRC to provide additional information about payments to employees, tax, National Insurance and other deductions. The new system will mean that HMRC and the Department for Work and Pensions (DWP) will have up to date information about employee’s incomes meaning that the HMRC tax coding is more likely to be up to date and that employees may no longer have to wait till the end of the tax year before it is established that an adjustment is required to their tax return.

RTI will require employee payroll details to be correctly entered onto the monthly submissions to HMRC in order for the system to work effectively. RTI submissions must match the information held by the HMRC including the full names of employees, their Dates of Birth and National Insurance numbers. The introduction of RTI means that P35’s and P14’s will no longer be required.

Small businesses must ensure that their payroll software is compatible with RTI and will enable the relevant PAYE information to be submitted electronically to HMRC. If you require assistance with RTI or would like to outsource your payroll, feel free to contact Belsize Accountancy on 0207 043 0052 or submit your request to RTI@BelsizeAccountancy.co.uk.

The new RTI legislation will apply to all businesses including small businesses and individual contractors. You are advised to act now in preparation for the change.

Dow Jones Hits All Time High

The Dow Jones reached an all time high, closing at $14,254 on Tuesday 5 March 2013. The index continues to rise and currently stands at $14,296 on 7 March 2013. The equity markets have clearly been provided with a boost following the substantial amounts of money printed by the major central banks last year.

The markets are particularly volatile under the current climate. Whilst equities have risen significantly over recent months, the price of gold has tanked, falling from a high of $1,791 last year to $1,574 on 7 March 2013.

The significant uptrend in equities combined with the sharp downtrend in gold suggest that an economic recovery is anticipated by the markets. However, this is not the case. Economic data suggests that the UK is falling into a triple dip recession, whilst Europe has announced negative growth in the final quarter of 2012. Most of the world markets are in recession, China has slowed down and the US is likely to face a slowdown once government finally faces up to the fact that significant spending cuts are required to tackle their fiscal deficit.

The major move in the markets is driven predominantly by the unprecedented level of money printing. Bloomberg explain that we are facing a period of global “currency wars” as the major economies attempt to devalue their currencies and artificially boost competitiveness.  The Bank of England have already indicated that they will consider further Quantitative Easing (or money printing) this year.

So what do we make of it all? The stimulus provided by last year’s money printing is still filtering into the system. Equities have risen sharply and may well continue to rise for a few months yet. However, the equity markets do not correlate with the underlying performance of the global economies. It is unlikely that we will see a recovery in the UK for a few years yet. In fact we can expect rising inflation as a result of the quantitative easing methods used by the central banks. The equity markets are due a sharp correction but this may not happen whilst money continues to be pumped into the system. Once the banks stop printing, or the US finally decide to tackle their fiscal cliff, we could be in for a huge downturn.

However it is not all doom and gloom. Stocks and shares are rising and so you are likely to have profited from your investments in shares. A continued downturn in the UK economy, or better yet a major correction is likely to benefit dynamic small businesses.  Strong contactors and small businesses are more likely to establish themselves during a recession. Investors are increasingly looking to invest in small businesses in order to maintain the required yields on their assets. The introduction of the Seed (or SEIS) scheme in the UK offers significant tax benefits to angel investors looking to invest in new start up businesses.

If you have a start up business or would like to know more about the SEIS scheme, please feel free to contact Belsize Accountancy on 0207 043 0052. We specialise in working with UK contractors and small businesses.