Tempo's 2012 Budget Summary

Here's our summary of the main points in the budget that may effect freelancers, contractors and SMEs.

• Personal tax free allowance.   This increases from the current £7,475 to £8,105 in April 2012 and then up to £9,205 in April 2013 towards the longer term target of 10K.

• Higher rate tax boundary. The 40% tax bracket changes from the current £35,000 to £34,370 for the tax year 2012-13.

• Dividend tax for higher rate earners.  No changes here.  Higher rate earners will still incur a 25% personal tax charge on net dividends.  Higher rate earners are those grossing more than £42,475 in the tax year.  April 2013 sees a reduction of this threshold to £41,450.

• Corporation tax.  This will still be 20% for the majority of small businesses.  Business with profits over £1.5M will benefit from a 1% reduction (to 25%) in April 2012 and an additional 1% the following April.

• Child benefits.  Recent changes to proposals now mean that there will be a phased reduction in child benefit when one of the household's earners has an income of more than £50K, with only those earning above £60K losing all of the benefits.

• Pensions.  The annual higher rate tax relief allowance for pension contributions remains capped at £50K and the benefit of a tax free lump sum withdrawal at retirement still remains as a great incentive to save.

• Property. An increase in stamp duty to 7% effects buyers spending in excess of £2M on a property.  Plus strong measures are bought in to clamp down those using a Limited company as a tax reduction mechanism for buying property. 

The good news for small business is that the tax rate remains at 20%. We feel this is essential for stimulating a major source of innovation and competitiveness for "UK PLC".

Tempo recognises that the staffing industry is one sector with a fighting entrepreneurial spirit and it's top earners will benefit from the reduction of top rate tax to 45p along with the reduction in corporation tax for big business. Hopefully this will encourage the nation’s entrepreneurs and wealth creators and will lead to improved job creation in the UK.

The budget report also mentions that IR35 is to be simplified and has identified a new regime to monitor it.  This is generally good news as complete replacement would cause more upheaval and cost to the industry.