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Dean & Co, 33 Haigh Moor Way, Royston, Barnsley, South Yorkshire. S71 4EG

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Overview of the Budget 2011




Income Tax Rates:


The 40% tax rate is reduced to £35,000. This introduces a subtle tax increase as it pulls more taxpayers into the 40% tax bracket, and increases the amount of income subject to tax at 40%.


2011/12 rates and bands:


Savings rate* (10%) - 0 to £2,560

Basic rate (20%) - 0 to £35,000

Higher rate (40%) - £35,001 to £150,000

Additional rate (50%) - over £150,000


* Only applies if non savings income is below this amount


Non-Domiciled and Non Resident:


People domiciled outside of the UK, and who have been resident in the UK for at least 7 years out of the previous 9 tax years, have to pay a remittance basis charge if they want to exclude their off-shore income and gains from UK taxation. This remittance basis charge is current set at £30,000 per year. It is proposed that from 6 April 2012 the remittance basis charge will increase to £50,000 for non-doms who have been UK resident for at least 12 years. Those who have been resident in the UK for at least 7 years but less than 12 years will continue to pay the £30,000 charge.





Personal Allowances:


The personal allowance for 2011/12 is to be increase £1,000 to £7,475. However, the 40% tax threshold will reduce to £35,000. From 6 April 2012 the personal allowance will be increased again by £630 to £8,105, and in that year the 40% threshold will be reduced further to £34,370.


Personal allowances are withdrawn at certain income thresholds, indicated below, and cannot be claimed by non-domiciled individuals who elect to have their foreign income and gains taxed on the remittance basis for the tax year.


2011/12 personal allowances:


Under 65 - £7,475

65-74 - £9,940

75 and over - £10,090

Minimum married couples allowance* - £2,800

Maximum married couples allowance* - £7,295

Blind person's allowance - £1,980

Income limit for allowances for those aged 65 or more - £24,000

Income limit for allowances for those aged under 65 - £100,000


* given where one partner was born before 6 /4/1935, and only as 10% reduction in tax.



IR35 Review


The Government has not agreed that IR35 should be abolished. But, there have been promised to improve it through HMRC to help companies operating IR35.



Capital Allowances


Main capital allowances from April 2012 changed as follows:


Main pool writing down allowance: 20% reduced to 18%

Special rate pool writing down allowance: 10% reduced to 8%

Annual Investment Allowance: £100,000 reduced to £25,000



Short Life Assets


Assets purchased on or after 1 April 2011 (6 April 2011 for unincorporated businesses) changed as follows:


The life of the short life asset will be deemed to be 8 years.



Enterprise Zones


21 Enterprise Zones are to be created and business will be able to apply for discount (up to 100%) on business rates. More details to follows at a later date.



Tax Reliefs Cancelled


More than 40 tax reliefs could be abolished because they are seldomly used, or obsolete. Most of these reliefs will be abolished after consultation. Some Reliefs on the list which may be of interest to small businesses include:


- Tax free meals for employees who cycle to work

- Relief from CGT for grants for giving up agricultural land

- Tax free late night taxis for employees

- Additional tax relief for companies that clean up contaminated land or buildings (land remediation relief)



Corporation Tax Rates


Changes from 1st April 2011:


Small profits rate of corporation tax 21% reduced to 20%  (this rate applies to companies with profits of up to £300,000)


Main rate of corporation of 28% reduced to 27% and will be reduced by 1% every year for the next 4 years.



Research and Development Tax Credits


Small and medium sized companies tax relief of 175% for qualifying revenue expenditure incurred on research and development projects. This relief is increased to 200% from 31 March 2011. Also, increase in this tax relief to 225% is planned for 31 March 2012.


The rules that govern what type of expenditure qualifies for this relief will also be revised with effect from 2012 to make it easier for small companies to claim this relief.







Changes to rates and thresholds from 6 April:


Lower Earnings Limit (LEL) for Class 1 NICs - £102/week

Employer's class 1 above £136/week not contracted out - 13.8%

Employee's class 1 not contracted out from £139 to £817/week - 12%

Employee's additional class 1 above £817/week - 2%

Self-employed class 4 from £7,225 to £42,475 per annum - 9%

Self-employed class 4 additional rate above £42,475 per annum - 2%

Self-employed class 2 - £2.50 per week

Voluntary contributions class 3 - £12.60 per week



Approved Mileage Rates:


The AMAP rate has increased from 40p per mile to 45p per mile from 6 April 2011 (for first 10,000 mile per year, 25p per mile thereafter)


Car Benefit:


The tax charge for personal use of a company car is based on a percentage of the list price of that car when new.


The taxable benefit of using a car with CO2 emissions of 121-129g/km is 15% of the list price. This percentage increases by 1% for each additional 5g/km of CO2 emissions to a maximum of 35% for cars with CO2 emissions of 225g/km or more.


Where a company car driver receives free fuel, the taxable benefit is calculated as the percentage of the list price for the car applied to a set value, currently £18,000. This value will increase to £18,800 from 6 April 2011. The maximum taxable benefit of receiving fuel for personal use will increase from £6,300 (for 2010/11) to £6580 (for 2011/12).





The rates and thresholds are as follows from 1 April 2011:


Lower rate - 0%

Reduced rate - 5%

Standard rate - 20%

Registration turnover - £73,000 (up from £70,000)

Deregistration turnover - £68,000 (up from £71,000)


Low Value Consignments:


The monetary limit for low value consignments will be reduced to £15 from 1 November 2011, and will be reviewed in March 2012.



Online Filing:


It will be compulsory for all VAT registered businesses to file their VAT returns online from 1 April 2012. At present only businesses who became VAT registered from April 2010 or those with turnover of £100,000 or more must file VAT returns online. Also from 1 August 2012 all requests to register or deregister for VAT will have to be made online.



Tax Credits:


Change in the income disregard from £25,000 in 2010/11 to £10,000 in £2011/12 for self employed people.



Savings and Investments:


Enterprise Investment Scheme:


Rate of income tax relief: 2010/11 - 20%, 2011/12 - 30%, 2012/13 - 30%


Annual maximum investment qualifying for income tax relief: 2010/11 - £500,000, 2011/12 - £500,000, 2012/13 - £1,000,000


These changes will be subject to State aid approval from the EU.


Venture Capital Trusts:


The number of companies accepting investments through the EIS or Venture capital Trusts to be increased from April 2012 to include those with gross assets less than £15 million, and with less than 250 employees. The amount a company can raise through these schemes in any year will also be increased from £2 million to £10 million.


Pension Contributions:


Contributions that can be made with full tax relief to a registered pension scheme is reduced from £255,000 to £50,000 per pension input period falling in the tax year.


The Lifetime Allowance will reduce from £1,800,000 in 2011/12 to £1,500,000 in 2012/13.


Independent Savings Accounts 2011/12:


Overall limit - £10,680

Cash up to - £5,340

Balance in stocks and shares up to - £10,680


For those aged 16 & 17:

Overall limit - £5,340

Cash up to - £5,340

Balance in stocks and shares up to - nil


From April 2012 the ISA savings limits will be increased in line with the consumer Prices Index (CPI) rather than in line with the Retail Prices Index (RPI), as has been the case so far.


Savings for Children:


Children born between 1 September 2002 and 2 January 2011 inclusive were eligible for a child trust fund account (CTF). Each child received a voucher to allow the account to be opened which also provided an initial deposit. The existing CTF accounts will continue and funds of up to £1200 per year can be contributed for each child tax free.


Junior ISA:


The Junior ISA is a replacement for the CTF but no funds will be provided by the Government. The junior ISA will be available to all children resident in the UK who do not have a child trust fund account. It will also have the following features:


- No tax will be charged on income or gains earned within the ISA.

- Funds placed in the account will be owned by the child and locked in until the child reaches age 18.

- Accounts can be opened from autumn 2011 (exact date to be announced).

- Sharia compliant products will be offered as Junior ISAs.

- The annual savings limits will be announced later, but are likely to be similar to normal ISAs.



Capital Gains Tax Rates and Thresholds:


The rates and thresholds for 2011/12:


Annual exemption - £10,600

Annual exemption for most trustees - £5,300

Rate for gains in basic rate band - 18%

Rate for gains above basic rate band - 28%

Rate for gains subject to entrepreneurs' relief - 10%

Lifetime limit for entrepreneurs' relief - £10,000,000



Entrepreneurs' Relief:


The lifetime limit will be doubled to £10 million for gains made after 5 April 2011.



Inheritance Tax:


The nil rate band for inheritance tax (IHT) will remain frozen until 2014/15 at £325,000. This is the amount of a person's estate that is free of inheritance tax.


The rate payable on death for 2011/12 remains at 40% with the rate payable on lifetime gifts to certain trusts remaining at 20%.


From April 2012 those that give at least 10% of their estate on death to charity will pay a reduced rate of IHT of 36%.



Whilst we endeavour to ensure that the information on this website is correct, we do not warrant its completeness or accuracy.