Following the 2013 Budget, here is our summary of the main tax rates, tax bands, and allowances for the 2013/2014 tax year, with particular reference to data which will affect the typical small business owner.
If you are looking for figures for the 2014/15 tax year, you will find them in ByteStart’s guide to the tax rates, allowances and thresholds of relevance to small business owners for the 2014/15 tax year.
- The small profits Corporation Tax rate remains unchanged at 20%. This rate is payable on all limited company profits beneath £300,000 per year.
- The main rate of Corporation Tax continues to fall from the 28% mark inherited by the Coalition Government. The rate will fall to 23% from 1st April 2013, to 21% the following year, and 20% from April 2015 – the same as the small profits rate.
- The main rate applies to annual profits of £1.5m per year and more. Marginal relief applies to companies who declare annual profits between the two thresholds.
Value Added Tax
- The compulsory VAT registration threshold rises to £79,000, and the deregistration threshold rises to £77,000.
Income Tax Allowances
- The personal allowance is £9,440. This will rise from April 2014 to £10,000 (a key Liberal Democrat objective).
- If you earn over £100,000 or more, the value of this allowance decreases by £1 for every £2 you earn over £100,000, and you will pay an effective marginal rate of tax of over 60% between the threshold and £118,880.
Income Tax Bands
- To accommodate the increased personal allowance, more people then ever will not enter the higher rate tax band.
- The higher rate income tax threshold has fallen to £32,010. Beneath this threshold, the basic 20% income tax rate applies.
- Between £32,011 and £150,000, the higher 40% income tax rate applies.
- The ‘additional’ 45% rate applies to all income above £150,000 during the 2013/14 tax year.
Dividend Tax Rates
- Dividend income is taxed according to the same income tax bands illustrated above.
- All company shareholders receive a 10% dividend voucher, as Corporation Tax has already been paid on company income before it has been distributed.
- As a result, there is no tax to pay on dividend income falling below the higher rate tax threshold
- Dividend income falling into the higher rate tax band is taxed at 32.5% (effective rate, after allowing for the 10% tax credit is 25%)
- Dividend income in the additional rate bracket is taxed at 37.5% from April 2013 (effective rate of 30.55%).
- If you are an employer, the Employers’ NIC rate is 13.8% on weekly earnings of £148 or more.
- Employees’ NICs are payable at 12% on income between £149 and £797 per week, and 2% on income of £798 and more per week.
- The self-employed pay Class 2 NICs at the rate of £2.70 per week.
- The self-employed also pay Class 4 NICs at 9% on annual profits between £7,755 and £41,450, and 2% on profits above £41,450.
- The standard multiplier to businesses based in England is 47.1p for the 2013/14 tax year.
- The ‘small business’ multiplier for England is 46.2p.
Corporate allowances and reliefs
- The Annual Investment Allowance is currently £250,000 – representing a 10-fold increase from the previous tax year.
- The Plant & Machinery rate is 18%, and the special rate remains at 8%.
- Small business R&D tax credits are 225% on the SME rate.
Other Personal Taxes & Allowances
- The Inheritance Tax (IHT) threshold stays at £325,000. Estates are taxed at 40% above this point.
- The Individual Savings Account (ISA) limit is £11,520, half of which can be held as cash.
- The annual Capital Gains Tax (CGT) allowance is £10,900.
- CGT is applied at two separate rates – 18% for ‘basic’ rate taxpayers, and at 28% above the higher rate income tax threshold.
- The tax-free pensions contribution limit is £50,000 and the lifetime allowance is £1.5m. From April 2014, these figures will be cut to £40,000 and £1.25m respectively.
- Stamp Duty Land Tax rates (payable when you buy a property) remain unchanged for 2013/14.
You can access detailed tax tables for individual and business taxes via the HMRC site (although some have not yet been updated following Budget 2013).