Budget Comment April 2011
Tax Simplification…
… has been with us for over a decade now and, you guessed it, things get more complicated every year!
This time round George Osborne announced that 43 tax reliefs are to be abolished – blimey head for shelter. Actually there’s no need to worry, these are reliefs that virtually no-one has heard of let alone makes use of. It’s just a loft clearing exercise.
George continues Gordon’s habit of signalling future changes to try and justify today’s spending. Year after year of over ambitious growth forecasts matched by unfunded spending have given rise to the worst borrowing figures in memory. And don’t be fooled by ‘deficit reduction’. This is Government’s attempt just to reduce the amount by which we overspend each year. We still overspend and the indebtedness gets worse.
Enough doom and gloom – it’s a nice blue sky out there today.
Looking at some of the main changes coming in for 2011/12
- The Personal Allowance (the amount we can earn tax free) is up £1,000 to £7,475
- But the point at which the 40% rate starts is reduced by £1,400 to £42,475
- Employees National Insurance is up 1% (from 11% to 12%)
- Self employed National Insurance is up 1% (from 8% to 9%)
- The National Insurance rate above the Upper Earnings Limit is up 1% (from 1% to 2%)
- Employers National Insurance is up 1% (from 12.8% to 13.8%)
- Tax free mileage allowance is up 5p (from 40p to 45p)
- Main Corporation Tax rate is down 2% (from 28% to 26%)
- Lower Corporation Tax rate is down 1% (from 21% to 20%)
- Enterprise Investment Scheme (EIS) Income Tax relief is up 10% (from 20% to 30%) it now matches the Income Tax relief available on Venture Capital Trusts (VCTs)
- Capital Gains Tax – Entrepreneurs Relief lifetime limit is up from £5m to £10m
- Research & Development credits up from 175% to 200%
- The £100 fine for late submission of a Tax Return stays but IT IS PAYABLE IN ALL CASES REGARDLESS OF THE TAX POSITION
- Tax Return and late payment penalties in general are far more ruthless – simple answer to this: DON’T BE LATE
Looking at some of the main changes coming in for 2011/12
- The Personal Allowance (the amount we can earn tax free) is up £630 to £8,105
- Non-domicile flat rate charge for the Remittance Basis to apply is up from £30,000 to £50,000
- The Annual Investment Allowance (for businesses) is down from £100,000 to £25,000
- The rate of Inheritance Tax is reduced from 40% to 36% where 10% of an estate is left to charity
and beyond
- From 6 April 2013, charities will be able to claim Gift Aid on cash collections
These are just headlines, please note the full chart of Rates and Allowances below and remember – there is always more to it than meets the eye so please contact us before taking or refraining from action.
As if to demonstrate this, look at the tax otherwise known as National Insurance – it’s clearly HMRC bonanza time with the massive increases noted above, but did you know that there is a Lower Earnings Limit, an Upper Earnings Limit, an Upper Accrual Point, a Primary Threshold, a Secondary Threshold, Class 1, Class 1a, Class 2, Class 3, Class 4 (with upper and lower profits limits), Deferment, Exemptions, Contract-out rates and Married Women’s adjustments! Consultation on merging National Insurance and Income Tax? Nice for the management consultants but, George, dream on!
Finally there are serious changes to pensions that are far too complex to consider here. The basics stay the same but, if you want to make significant contributions or do anything radical, contact us and we will either advise or (quite likely) pass you on to a pension specialist.
Rates and Allowances for 2011 and 2012
Rates and allowances for income tax, corporation tax, capital gains tax, inheritance tax and the pension schemes earnings cap are set out below.
2010-11 (£) |
2011-12 (£) |
Increase (£) |
|
| Income tax allowances | |||
| Personal
allowance Personal allowance for people aged 65-74 Personal allowance for people 75 and over |
6,475 9,490 9,640 |
7,475 9,940 10,090 |
1,000 450 450 |
| Income
limit for under 65 personal allowance Income limit for age-related allowances |
100,000
22,900 |
100,000 24,000 |
0 |
| Married
couple’s allowance for people born before 6 April
1935 Minimum amount of married couple’s allowance Blind person's allowance |
|
7,295 2,800 1,980 |
330 130 90 |
| Capital
gains tax annual exempt amount: Individuals etc Other trustees |
10,100 5,050 |
10,600 5,300 |
500 250 |
| Inheritance tax threshold | 325,000 |
325,000 |
0 |
Taxable
bands 2010-11 (£) |
Taxable
bands 2011-12 (£) |
||
| Starting rate 10% | – |
Starting rate 10% | – |
| Basic rate 20% | 0
– 37,400 |
Basic rate 20% | 0
– 35,000 |
| Higher rate 40% | 37,400
- 150,000 |
Higher rate 40% | 35,000
- 150,000 |
| Additional rate 50% | Over
150,000 |
Additional rate 50% | Over
150,000 |
| Corporation tax profits 2011 (£) | |
| Small companies’ rate 20% | 0
– 300,000 |
| Marginal relief | 300,001
– 1,500,000 |
| Main rate 26% | 1,500,001
or more |
National Insurance changes from 6 April 2011
2010/2011 |
2011/2012 |
|||
| Class 1 Employees | ||||
| On first | £110 pw | Nil | £139 pw | Nil |
| Between | £110 - £844 pw | 11% | £139 - £817 pw | 12% |
| Over | £844 pw | 1% | £817 pw | 2% |
| Employee's contracted-out rate | 1.6% | 1.6% | ||
| Married
womans reduced rate |
4.85% of £110 to £844 pw, 1% above £844 | 5.85% of £139 to £817 pw, 2% above £844 | ||
| Class 1 Employers | ||||
| On first | £110 pw | Nil | £136 pw | Nil |
| Over | £110 pw | 12.8% | £136 pw | 13.8% |
| Employers' contracted-out rebate, salary related schemes | 3.7% | 3.7% | ||
| Employers' contracted-out rebate, money purchase schemes | 1.4% | 1.4% | ||
| Class 2 Self employed | ||||
| Flat rate | £2.40 pw | £2.50 pw | ||
| Small earnings exception | £5,075 pa | £5,315 pa | ||
| Special Class 2 rate for share fishermen | £3.05 pw | £3.15 pw | ||
| Special Class 2 rate for volunteer development workers | £4.85 pw | £5.10 pw | ||
| Class 3 Voluntary | ||||
| Flat rate | £12.05 pw | £12.60 pw | ||
| Class 4 Self employed | ||||
| On profits between | £5,715 - £43,875 pa | 8% | £7,225 - £42,475 pa | 9% |
| above £43,875 | 1% | above £42,475 | 2% | |
Stamp Taxes
Transfers of property (consideration paid)
| Rate | All
land in the UK |
Land
in disadvantaged areas |
||
| Residential | Non-residential | Residential | Non-residential | |
| Zero | £0 - £125,000 | £0 - £150,000 | £0 - £150,000 | All |
| 1% | Over £125,000 – £250,000 | Over £150,000 – £250,000 | Over £150,000 – £250,000 | N/A |
| 3% | Over £250,000 – £500,000 | Over £250,000 – £500,000 | Over £250,000 – £500,000 | N/A |
| 4% | Over £500,000 | Over £500,000 | Over £500,000 | N/A |
New leases (lease duty)
Duty on the premium is the same as for transfers of land (except that special rules apply for non-residential land and property premium where rent exceeds £1,000 annually. The rules no longer apply to residential property from 12 March 2008). Duty on the rent is charged on any part of the net present value (NPV) which exceeds the threshold.
| Rate | Net
Present Value of Rent Rate |
|
| Residential | Non-residential | |
Slice
of NPV |
||
| Zero | £0 - £125,000 | £0 - £150,000 |
| 1% | Over £125,000 | Over £150,000 |