UK Cuts Taxes in New Budget

March 21, 2013 Taxation in UK

Chancellor George Osborne on Budget DayLONDON – Individuals and businesses in the UK will soon see some reductions in their tax obligations, as the government reveals a series of tax cuts while announcing the new national budget.

Late on March 20th the Chancellor of the Exchequer of the UK George Orborne unveiled the annual government budget, which, according to the HM Revenue and Customs, revolves around the principals of fiscal responsibility and monetary activism.

Amongst the changes revealed in the budget, one of the key points announced is an increase to personal tax allowances, which raises the tax free threshold for workers to GBP 10 000, effectively ensuring that from April 2014 more then 3 million individual taxpayers in the UK will no longer be liable to pay personal income taxes.

The increase to the tax free threshold was first introduced earlier last year, but was originally scheduled to be implemented in 2015.

Individual taxpayers are also set to see improvements in their tax filing processes, as later this year the government will also launch a new round of consultations on the current Pay as You Earn (PAYE) tax system, with the aim of optimizing tax administration procedures in order to make them fairer and more balanced for individuals.

Businesses will also benefit from the new tax changes, with the corporate tax rate in the UK set to be reduced from 22 percent to 21 percent in 2015, and being cut by a further 1 percent the following year.

As part of the overall future taxation strategy outlined in the budget, the government will also concentrate more on stopping the occurrence of illicit tax evasion and aggressive tax avoidance, and hopes to raise overall tax revenues by nearly GBP 3 billion by closing tax loopholes and by implementing a new framework to help tackle the problems posed by profit-shifting to offshore tax havens.

The government also called several other changes, which the media have already labelled as “populist measures”, due to the fact that they directly address minor concerns which were voiced by the public but received wide media attention over the course of 2012 and 2013, including a removal of a planned GBP 0.03 hike to excise duties on petrol, and a GBP 0.01 cut to the excise duty on beer.

Photo by HM Treasury