Planning for the reduction in the top tax rate from 50% to 45%

News: May 2012

Planning for the reduction in the top tax rate from 50% to 45%

It may seem early to consider this, in view of the reduction not taking effect until the 2013/14 tax year, but that depends on your circumstances.

The scope for deferring income and/or accelerating expenditure can require a long lead-in time. In addition, if profits of a sole trader or partner are based on an accounting period ending near the start of the tax year, the options need to be looked at now. A year end of 30 April means that the year to 30/4/12 is taxed in 2012/13 with a top rate of 50%, whereas the accounting year starting on 1 May 2012 is taxed in 2013/14 with a top rate of 45%.

Changing your accounting date may create advantages – it all depends on the profit pattern, both actual and likely, and we will be pleased to undertake a fresh exercise for you on this.

HMRC estimate that, based on their assumptions of the income shifted from 2010/11 to 2009/10, to avoid the 50% charge, income of £6.25 billion is likely to be shifted from 2012/13 to 2013/14. Let us see the scope for you!

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