Budget 2013

Necessarily a muted Budget, as the Chancellor had little room for manoeuvre, but there were a couple of surprises to keep us interested!

National Insurance £2,000 Credit - from April 2014

Giving a £2,000 credit from April 2014 against employer's national insurance is a welcome initiative which may encourage small businesses to take on some staff.

Using the 2013/14 national insurance thresholds, one employee could be taken on next year earning a salary of £22,000 and the employer's national insurance bill will remain at £Nil.

Director-Shareholder Loan Accounts

Any temptations to take a director-shareholder loan, repay it before corporation tax is charged on it, and then borrow another amount soon afterwards, so that not too much has in reality changed, will no longer be tolerated under a new anti avoidance rule effective from today. This is very important for forthcoming March 2013 year ends.

On the other hand, loans can be made from April 2014 to employees and directors up to £10,000 (was £5,000) without an income tax cost. Even if the loan is under £10,000 it will still need to be repaid by director-shareholders before 9 months after the year end and not repeated to save a corporation tax charge.

If you have staff who would benefit from a loan (and you have the cash and are willing to lend it to them!) this might be worth looking at as a way of giving some tax free value to your employees.

Personal Tax Allowance - £10,000 - from April 2014

As £10,000 is one of the Chancellor's favourite numbers, the tax free income tax allowance has been increased one year earlier than predicted from April 2014.

With the likelihood that employer's national insurance will start at a much lower threshold and with the new £2,000 credit, there is a widening gap where the tax cost of a higher salary might start to be lower than the tax cost of dividends.  Perhaps this is the intention!

Alternatively, where profits are made on rented profits, the £10,000 allowance will be a useful way to keep the tax on that property as low as possible.

Seed Enterprise Investment Scheme

The capital gains tax refund for the investor originally planned to last until March 2013, continues to be available into the next tax year, although at half the amount. This is a welcome extension which should help SMEs raise the finance they need.

More information will come out in due course, so it's always checking the detail before taking any action.