The Chancellors’ Autumn Statement

Chancellor George Osborne released his Autumn Statement on Thursday. Overall the Statement did not include any significant changes to Budgetary policy and offered no new ideas to tackle the huge Budget deficit in the UK. However, there were a few points of note:

-The UK Growth Forecast was found to be too optimistic and has been downgraded. The UK economy is forecast to shrink by 0.1% this year and to expand by just 1.2% in 2013. Household spending is at a 14 year low.

-George Osborne will be sticking to his fiscal consolidation programme and the fiscal squeeze is likely to last another 6 more years. Austerity measures are likely to continue throughout 2013 and George Osborne will continue to target tax avoidance.

-The Chancellor will place additional taxes on the rich, the unemployed and the squeezed middle.

Proposed tax changes:

-The Personal Allowance will increase to £9,440 from April 2013. This will provide a boost to the lower paid.

-The threshold for the 40% Higher Rate of tax will increase by 1% from 2014. The increase is likely to be below inflation and will result in more people falling into the 40% tax band.

-The Annual Tax Free Allowance for Pensions will be reduced from £50,000 to £40,000 from April 2014. The lifetime limit will fall from £1.5m to £1.25m. This change could have a significant impact on pensioners with defined benefit schemes.

-The inheritance tax nil rate band will increase to £329,000 from 6 April 2015.

-The main rate of Corporation tax will reduce to 21% from April 2014.

-From 1 January 2013 the annual investment allowance (AIA) will increase from £25,000 to £250,000 for two years as the chancellor bids to promote capital spending for businesses.

There are two key changes which will affect UK contractors and small businesses. The increase in the AIA will be significant for businesses that can take advantage of the tax relief against their capital expenditure in 2013 and 2014. Contractors with high income may be affected by the reduction in the pension allowance. For further advice, please contact Belsize Accountancy.