20 March 2013
Unveiling his fourth Budget since the coalition came to power, Chancellor George Osborne promised that this would be a Budget for an “aspiration nation” which recognised that Britain had to work its way to economic recovery, telling them: “We are on your side.” Addressing MPs in the House of Commons, Mr Osborne announced a range of measures, including tax breaks for businesses, help for homebuyers and billions of pounds for infrastructure projects.
- Summary of key proposals
- Setting the scene
- Personal tax
- Business and enterprise
- Tax evasion and tax avoidance
- Pensions and benefits
- Homes and infrastructure
- Energy and environment
- Official documents from George Osborne’s 2013 Budget
- Corporation Tax to be reduced by 1% to 20% by 2015.
- New employment allowance to reduce National Insurance bills by £2,000 for every employer from April 2014, meaning 450,000 small businesses will no longer pay National Insurance.
- Tax-free personal allowance to be increased to £10,000 from April 2014, a year earlier than planned.
- Tax avoidance and evasion measures announced, including agreements with the Isle of Man and the Channel Islands.
- Introduction of tax relief for investment in social enterprises.
- Capital Gains Tax holiday to be extended for another year for the Seed Enterprise Investment Scheme (SEIS) from April 2013.
- An additional £3 billion a year to be invested in infrastructure from 2015/16, totalling £15 billion over the next decade.
- New tax incentives for manufacturers of ultra-low emission vehicles, as well as a ‘generous’ new tax regime to encourage investment in shale gas.
- Single flat-rate state pension of £144 a week to be brought forward to 2016, a year earlier than planned.
- New ‘Help-to-Buy’ scheme offering equity loans worth up to 20% on newly built homes for anyone looking to get on the property ladder, while a new mortgage guarantee worth £130 billion will help those who cannot afford a large deposit.
- Cancellation of September’s planned rise in fuel duty, while the planned rise for all alcohol duty will remain, with the exception of beer duty which will be cut by 1p from 24 March 2013.
- Tax-free childcare vouchers worth £1,200 per child to be introduced.
- New anti-avoidance rules to be introduced with immediate effect to tackle ‘bed and breakfasting’ of close company loans to avoid a S455 charge. New rules will also cover avoidance of a tax charge by lending the money to an intermediary.
- Amendments to rules on the deductibility of liabilities in working out Inheritance Tax liability due on estates, which is likely to impact on individuals with EBT loans outstanding.
Following a similar theme to last year’s Budget, Chancellor George Osborne told MPs that his 2013 Budget was for “people who aspire to work hard and get on”. Repeatedly using the phrase “aspiration nation”, Mr Osborne said the message to those who understood the need to work hard to achieve economic recovery was: “We are on your side.” This Budget, he said, would not duck the nation’s problems but would face them head on.
While the Office for Budget Responsibility (OBR) had halved its 2013 GDP growth forecast to just 0.6%, it also predicted that the UK would avoid a second quarter of negative growth and a triple-dip recession.
The OBR has also downgraded its growth forecast for 2014 to 1.8% (down from 2%), although its forecasts for 2015 (2.3%), 2016 (2.7%) and 2017 (2.8%) remain the same as its previous predictions.
Borrowing has fallen by £45 billion since the coalition came to power, Mr Osborne announced, with borrowing predicted to be £114 billion for this year, £108 billion in 2013/14, £97 billion in 2014/15, £87 billion in 2015/16, £61 billion in 2016/17 and £42 billion in 2017/18. These figures are higher than those predicted in December’s Autumn Statement, in which borrowing was predicted to drop to £31 billion by 2017/18.
The deficit is forecast to be 7.4% of GDP this year – again, higher than the 6.9% forecast in the Autumn Statement – with the Government aiming for a deficit of 2.2% by 2017/18 (predicted to be 1.6% in the Autumn Statement).
Mr Osborne announced that September’s planned rise in fuel duty has been cancelled.
There was good news for beer drinkers, with the Chancellor announcing that April’s planned 3p rise in beer duty was being scrapped. In addition to this, beer duty will also be cut by 1p, effective from Sunday night (24 March). The “duty escalator” will remain in place for wine, cider and spirits, however.
There were no changes to existing plans on tobacco duty announced back in 2010’s Budget.
The tax-free personal allowance is to be increased to £10,000 from April 2014 – a year earlier than planned. Mr Osborne said this would result in almost three million of the lowest earners paying no income tax at all.
Corporation Tax will be cut by 1% to 20% by April 2015, with the Chancellor saying that this would show that “Britain is open for business”. This reduction will be offset by increasing the bank levy to 0.142%.
A new employer allowance will be introduced in April 2014, reducing National Insurance bills by £2,000 for every employer in the country. Mr Osborne said this would result in around 450,000 small businesses paying no National Insurance at all. This equates to one third of all employers. The allowance would also be available to charities and community sports clubs.
A tax relief will be introduced to encourage investment in social enterprises. The Government will consult formally on the details by summer this year, with the relief being introduced in the Finance Bill 2014.
The Capital Gains Tax holiday will be extended for the Seed Enterprise Investment Scheme (SEIS) for another year from April 2013, meaning that investors making capital gains in 2013/14 will receive a 50% Capital Gains Tax relief when they reinvest those gains into seed companies in either 2013/14 or 2014/15.
The Chancellor has also announced a range of tax incentives to further encourage employee share ownership in companies.
The Chancellor unveiled a raft of measures designed to tackle tax evasion and tax avoidance, including agreements with the Isle of Man and the Channel Islands, which he hopes will bring in an additional £2 billion. He also confirmed that the General Anti-Abuse Rule (GAAR), first unveiled in last year’s Budget, will be introduced in this year’s Finance Bill.
He also sent out a clear message to those involved in ‘abusive’ tax avoidance schemes: “This Government is not going to let you get away with this.”
The Government has also closed a loophole which allowed companies to sell corporation tax losses to unconnected third parties, as it continues to crack down on aggressive tax avoidance.
Mr Osborne announced that a single flat-rate state pension of £144 a week would be brought forward a year to 2016.
Rewarding working families, the Chancellor also announced plans to introduce tax-free childcare vouchers worth up to £1,200 per child.
He also announced that social care costs for the elderly will be capped at £72,000 from 2016.
The Chancellor pledged payments of £5,000 for individuals who lost money on Equitable Life annuities bought before 1992, with an extra £5,000 for those on lower incomes.
One of Mr Osborne’s key announcements in this area was the launch of a new £3.5 billion ‘Help-to-Buy’ scheme, which would offer equity loans worth up to 20% on newly built homes to anyone wishing to get on the property ladder. The only condition attached to this measure is that those wishing to apply for the loans must put down 5% of the deposit from their own savings.
The Government is also launching a new mortgage guarantee worth £130 billion to help families who cannot afford a large deposit.
The Chancellor pledged an additional £3 billion a year to invest in infrastructure from 2015/16, resulting in a total of £15 billion over the next decade. Exact details of where this money would be spent were not revealed.
New tax incentives will be offered to manufacturers of ultra-low emission vehicles, Mr Osborne revealed.
There was also good news for the pottery industry in the Midlands, which the Chancellor said would be exempt from the climate change levy in order to help boost growth.
Mr Osborne also made his feelings clear on the controversial issue of shale gas, stating: “Shale gas is part of the future”. He said a ‘generous’ new tax regime would be introduced to promote investment in this area.