Following the announcements made in Budget 2013, we’ve compiled a list of all the main tax rates and allowances which will affect a typical limited company owner.
- The main rate (which applies to profits of £1.5m or more) will fall from 24% to 23% from 1st April 2013. Following successive announcements, the rate will fall to 21% from 1st April 2014, and then to 20% in April 2015. The small profits rate and main rate of Corporation Tax will then be aligned.
- The small profits rate applies to companies who make profits of £300,000 or less per year, and remains unchanged.
- If your company makes profits which span the CT thresholds, then a system of ‘marginal relief’ applies. You can find out more in our Corporation Tax guide.
Value Added Tax
- The registration threshold level rises by £2,000 to £79,000, and the deregistration threshold is £77,000 from 1st April 2013.
Income Tax – Personal Allowance
- The personal allowance for the 2013/14 tax year is £9,440 (up from £8,105).
- For every £2 you earn over £100,000 per year, you lose £1 of the personal allowance, creating a punitive marginal tax rate of 60% between £100,000 and £18,880.
- At Budget 2013, the Chancellor announced that the personal allowance would rise further, in April 2014, to £10,000.
Income Tax Bands
- The basic rate (20%) applies to income up to £32,010 (it has been reduced from £34,370).
- The higher rate (40%) applies to income from £32,011 to £150,000.
- The additional rate (45%) applies to income of £150,000 and over (the additional rate band was reduced from 50% to 45%).
Dividend Tax Rates
- The same income tax bands listed above are used to calculate your dividend tax liability. Once the 10% tax credit is taken into account, the effective tax rate is listed in brackets):
- The basic rate is 10% (0% – no further tax to pay as dividend owners receive a 10% tax credit automatically which cancels out the tax liability)
- The higher rate is 32.5% (25%)
- The additional rate is 37.5% (a cut from 42.5%) (30.55%)
- For further information, try our tax on dividends overview.
National Insurance Contributions (NICs)
- Limited companies and their employees are subject to Class 1 NICs. The self-employed (sole traders, partnerships) are liable to Class 2 and Class 4 NICs.
- The employers’ NIC rate is 13.8% on weekly earnings above £148.
- The employees’ NIC rate is 12% on earnings between £149 and £797 per week, and 2% on earnings above £797 per week.
- Class 2 NICs are £2.70 per week for the 2013/14 tax year.
- Class 4 NICs are 9% of annual profits between £7,755 and £41,450 per year, and 2% on profits above £41,450 per year.
- Try our guide to National Insurance for further information.
Pensions savings tax relief
- The annual allowance limit remains at £50,000.
- As previously announced, the limit will be cut to £40,000 from April 2014.
- The lifetime allowance remains at £1.5m, but will also be cut to £1.25m from April 2014.
Individual Savings Accounts (ISAs)
- The total limit for an ISA in 2013/14 is £11,520, of which £5,760 can be held in cash.
Capital Gains Tax
- The basic and higher rates of CGT remain in 2013/14 – 18% and 28% respectively.
- The lifetime limit for Entrepreneurs’ Relief is £10m, and the tax rate remains at 10%.
- The annual CGT-exempt allowance rises to £10,900.
- The Inheritance Tax Threshold (IHT) remains at £325,000 for another year, and is unlikely to increase until near the end of the decade.
- After this threshold, estates are taxed at 40%.
Stamp Duty Land Tax
- No changes to SDLT were announced in Budget 2013.
- No tax applies to property purchases up to £125,000.
- 1% tax on homes between £125,001 and £250,000.
- 3% tax on homes between £250,001 and £500,000.
- 4% tax on homes between £500,001 and £1m.
- 5% tax on homes between £1m and £2m.
- 7% tax on homes worth more than £2m.
Corporation Tax allowances and reliefs
- As previously announced, the Annual Investment Allowance (AIA) has been increased ten-fold, to £25,000 from 1st April 2013.
- Plant & Machinery – main rate remains at 18%, and the special rate stays at 8%.
- R&D tax credits (for small businesses) remain at 225%.
- First year allowances remain at 100%.
- The England standard multiplier is 47.1p (up from 45.8p)
- The England ‘small business’ multiplier is 46.2p (up from 45p)